Selected OLD exam questions regarding absolute and comparative advantage

Q. No. 1
Pakistan and Japan are producing automobiles and rice. Pakistan has comparative advantage in the
production of rice while Japan has comparative advantage in the production of automobiles. From the
information given in the following table, calculate the domestic exchange ratios. Draw production
possibility curve for Pakistan.

Country Rice (Hours/unit) Automobiles (Hours/unit) Total Available hours

Pakistan 10 30 180000

Japan 20 40 320000

Q. No. 2

Pakistan and Japan are producing automobiles and rice. Calculate comparative advantage and domestic
exchange ration of each country from the information given in the table below. If Pakistan produces 600
of Rice then what would be the production of Automobiles in Pakistan. If Pakistan exports 250 units of
Rice to Japan then how much units of Automobiles can be imported from Japan against these 250 units of
cloth at an appropriate International Exchange ratio beneficial for both countries?

Country Rice (Hours/unit) Automobiles (Hours/unit) Total Available hours

Pakistan 10 30 9000

Japan 20 40 16000

Q. No. 3
Pakistan and Japan are producing automobiles and rice. Pakistan has comparative advantage in the
production of rice while Japan has comparative advantage in the production of automobiles. From the
information given in the following table, calculate the domestic exchange ratios. Draw production
possibility curve for Pakistan.

Country Rice (Hours/unit) Automobiles (Hours/unit) Total Available hours

Pakistan 1 3 18000

Japan 2 4 32000

Q. No. 4. Pakistan and Germany are producing automobiles and rice. Pakistan has comparative
advantage in the production of Rice while Germany has comparative advantage in the production
of Automobiles. From the information given in the following table, calculate the domestic
exchange ratios. Using 1 Automobile = 2.5 Rice as international exchange ratio, calculate the
gains from trade in terms of number of hours in Complete Specialization for Pakistan only if
Pakistan Imports 2000 units of automobiles
Country Rice (Hours/unit) Automobiles (Hours/unit) Total Available hours

Pakistan 4 12 36000

Germany 8 16 64000

Q. No. 5. Pakistan and Japan are producing automobiles and rice. Identify absolute and
comparative advantages of both countries. From the information given in the following table,
calculate the domestic exchange ratios. Do you think that 1 Automobile = 2.5 Rice is an
appropriate international exchange ratio? If yes then using this ratio, calculate the gains from
trade in terms of number of hours in Complete Specialization for Pakistan only if Pakistan
Imports 2000 units of automobiles. (6)
Country Rice (Hours/unit) Automobiles (Hours/unit) Total Available hours

Pakistan 4 12 36000

Japan 8 16 64000