Suppose That: • Malaysia Requires an Hour of Labor to Produce a Produce

Essay

Suppose that:
• Malaysia requires an hour of labor to produce a pound of rice and 2
hours of labor to produce a pencil;
• Indonesia requires 2 hours of labor to produce a pound of rice and 4
hours of labor to produce a pencil;
• each country has 10,000 hours of labor to allocate between the
production of rice and pencils; and
• in autarky, Malaysia consumes 5,000 pounds of rice and 2,500
pencils.
Which country has an absolute advantage in rice production? In pencil
production?
Which country has a comparative advantage in rice production? In pencil
production?
Will trade between the two countries be mutually beneficial?