Comparative Advantage and Trade

Question

I am having a hard time figuring out the math

 

Kneeland has 60 workers. Each worker can produce 4 widgets or 4 wadgets. Each resident in Kneeland currently consumes 2 widgets and 2 wadgets. Freeland also has 60 workers. Each can produce 5 widgets or 10 wadgets. Freeland's residents consume 1 widget and 8 wadgets. Is there a basis for trade? If so, offer the countries a deal they can't refuse.

Start by determining which country has a comparative advantage in producing widgets and which one has a comparative advantage in producing wadgets. Show your work.

Answer 1

it costs kneeland one wadget to produce one widget and vice versa

it costs freeland two wadgets to produce one widget and costs 1/2 widget to produce 1 wadget

widgets are cheaper in kneeland, twice as cheap

wadgets are cheaper in freeland, twice as cheap

wadgets in freeland cost 1/2 widget

wadgets in kneeland cost 1 widget

widgets in kneeland cost 1 wadget

widgets in freeland cost 2 wadgets

freeland has a comparative advantage in wadgets

kneeland has a comparative advantage in widgets

freeland has an absolute advantage in both but his is irrelevant to trade with kneeland

if the price of widgets is set between 1 and 2 wadgets

trade is mutually beneficial to both countries

but the consumers may put a limit on trade if they have input into the price

still given the way the problem reads, local consumption is a very small percent of the total trade, so it makes relatively small impact on the international price