1. Compare the absolute and comparative advantages for two countries. Suppose there are two countries A...
1. Compare the absolute and comparative advantages for two countries. Suppose there are two countries A and B producing two products X and Y.
The unit labor requirement for two countries and two products are: a A X = 1; a A Y = 5; a B X = 10; a B Y = 10
• Which country has absolute advantage in producing X? Why?
• Which country has comparative advantage in producing X? Why?
• Suppose there are LA = 100 identical workers inhabiting in the Country A, define the production possibility set and the production possibility frontier for Country A. (you can use either algebra or numbers)
2. Look at the country A only, suppose each worker has preferences U defined by:
UA = β1ln(C A X ) + β2ln(C A Y ) , where C A X is the consumption level for product X and C A Y is the consumption level for product Y.
• Find the autarky equilibrium for economy A. (hint: following the three major steps on the handout) • And then describe the equilibrium for economy A.
Homework Answers
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1. Compare the absolute and comparative advantages for two
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need help with d and e 1. Comparative Advantage (1.5 marks) Analyze the following two countries....
need help with d and e
1. Comparative Advantage (1.5 marks) Analyze the following two countries. In one day in Germany, it takes 24 workers to produce an airplane and 6 workers to produce a boat. In one day in France, it takes 8 workers to produce an airplane and 4 workers to produce a boat. Both countries have 48 workers available each day. Draw the PPF of each country for one day's worth of production. Use a separate graph...
(a) In which product does country H have the absolute advantage over country F? According to...
(a) In which product does country H have the absolute advantage
over country F? According
to Smith’s theory, which product should country H export? In
which product does
country H have the comparative advantage over country F?
According to Ricardo’s theory,
which product should country H export?
(b) Specify the production possibility curve (PPC) in country H.
Calculate the production
and consumption allocation of country H in the no-trade case.
Take fruits as the unit of account.
How much is...
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L4 X-150 Y 150 Y-300 150 ol Mexico Canada ov 1. The production possibility frontiers of...
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1. Absolute advantage and comparative advantage A AaB Suppose you have the following information on the...
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need help with d and e
1. Comparative Advantage (1.5 marks) Analyze the following two countries. In one day in Germany, it takes 24 workers to produce an airplane and 6 workers to produce a boat. In one day in France, it takes 8 workers to produce an airplane and 4 workers to produce a boat. Both countries have 48 workers available each day. Draw the PPF of each country for one day's worth of production. Use a separate graph...
(a) In which product does country H have the absolute advantage
over country F? According
to Smith’s theory, which product should country H export? In
which product does
country H have the comparative advantage over country F?
According to Ricardo’s theory,
which product should country H export?
(b) Specify the production possibility curve (PPC) in country H.
Calculate the production
and consumption allocation of country H in the no-trade case.
Take fruits as the unit of account.
How much is...
L4 X-150 Y 150 Y-300 150 ol Mexico Canada ov 1. The production possibility frontiers of two countries are represented on the graph:s above as straight lines. Let Good X be units of oil (100,000's of barrels) and Good Y be units of automobiles (100,000's of cars). Mexico is currently producing and consuming the goods combination represented by Point A. Canada is currently producing and consuming the goods combination represented by Point B a. Does either country have an absolute...
1. Absolute advantage and comparative advantage A AaB Suppose you have the following information on the marginal product of labor in rice production and apparel production in Japan and Thailand: Marginal Product of Labor Thailand Rice (bushels per hour) Apparel (units per hour) Complete the following table by computing opportunity costs of each good in terms of units of another good for both countries: Japan Thailand Opportunity cost of rice (units of apparel per bushel) Opportunity cost of apparel (bushels...
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