Question

RICARDIAN MODEL 9-12 In the United States, the wage paid making aircraft exceeds the wage paid growing oilseeds when have free trade with China. 9. Oportunity cost When opening up to free trade, the relative price of aircraft to oilseeds in the United States Rises so aircraft become more expensive in the U.S. due to international trade b. Remains the same as before international trade Falls so aircraft become cheaper in the U.S. due to international trade Either a or bare possible given the information provided Either b or care possible given the information provided d. 10. When opening up to free trade, the relative price of aircraft to oilseeds in China a. Rises so aircraft become more expensive in China due to international trade b. Remains the same as before international trade Falls so aircraft become cheaper in China due to international trade Either a orb are possible given the information provided Either bor c are possible given the information provided c. d. 11. The United States must have a lower opportunity cost of compared to China. a. Neither aircraft nor oilseeds Only aircraft Only oilseeds Both aircraft and oilseeds Cannot tell from the information provided - e. 12. Does China gain from trade? a. No, China is definitely worse off with trade than without b. No, China is indifferent between trading and not trading C. Yes, China is definitely better off with trade than without d. Only if China produces only oilseeds e. Only if China produces only aircraft

Answer 1

a) When the wages paid to the Aircraft labor increases on opening of the trade that means the demand for Aircraft increase and that increased demand will increase production of the aircraft and demand for labor in that sector, US is exporting Aircraft and buying oil seeds from China.

a) When opening the trade the opportunity cost of Aircraft will increase and thus they will produce more, the answer is "A".

b) "C"

The price of aircraft in China will fall and oilseeds will increase, the answer is "C".

c) "B"

As US is exporting Aircraft they have a comparative advantage in producing aircrafts.

d) "D"

FI China is producing oilseed then they are better off.