Homework Answers
Answering only first Four parts as HOMEWORKLIB RULES rule.
unit labor requirement table :
| Home H | foreign f | |
| Food F | 3 | 3 |
| Clothes C | 2 | 1 |
| Labor supply | 1200 | 800 |
A) now country with lower Opportunity cost will have Comparative advantage in that good
So (aLF/aLC) = (3/2) < (aLF/aLC)* = 3
So Home has Comparative advantage in Food
.
b) foreign f has Comparative advantage in Clothes
.
c) PF/PC in home = Opportunity cost of production of F in Home
= 3/2 = 1.5
Relative price of F in foreign = 3/1 = 3
.
d) PPF , home ;
Max F = 1200/3 = 400, max C = 1200/2 = 600
graph, F on X axis, C on Y axis ,
slope of PPF = 6/4 = 3/2
foreign f
max F = 800/3, max C = 800/1 = 800
slope of ppf = 3
e) world supply Curve :
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