Question

Determine which commodity each country should specialize and trade in

	Fish	Wheat
Namibia	10	20
South Africa	20	60

The opportunity cost are

Namibia                 1Fish=                            1Wheat=

South Africa           1Fish=                            1Wheat=

Namibia should specialize in the production of.........................?

South Africa should specialize in the production of.......................?

The opportunity cost are

Namibia 1fish=   1wheat=

South africa 1fish=   1wheat=

Answer 1

This is a case of Comparative Advantage.

Given the below situation

                              Fish                Wheat

Namibia                    10                    20

South Africa            20                    60

The opportunity costs are as follows

Namibia

1 Fish=2Wheat

1 Wheat=.5 Fish

South Africa

1 Fish=3 Wheat

1Wheat=.33 Fish

Namibia has to give up 2 units of wheat, to produce 1 additional unit of Fish and 1/2 unit of Fish to produce 1 additional unit of Wheat.

South Africa has to give up 3 units of wheat to produce 1 additional unit of Fish and .33 units of Fish to produce 1 aditional unit of wheat.

In South Africa, the opportunity costs of producing fish are higher in South Africa (3 units of wheat), while that of producing wheat are relatively lower ie.33 units of fish.

In Namibia the opportunity cost of producing fish are 2 units of wheat and that of wheat are 1/2 a unit of fish.

Since the opportunity costs of producing 1 unit of Fish is very high (3 units of wheat), South Africa should specialize in production of wheat, and Namibia should specialize in Fish because opportunity cost of producing fish is relatively lower in Namibia ie 2 units of wheat