Question

Suppose that in an hour a German worker can produce 200 clothes or 20 cars, while a Japanese worker can produce 150 clothes or 10 cars. Each country has 8 hours available.   (a) Suppose that without trade the labour in each country spend 25% of their time producing clothes. How many clothes and cars would Germany produce?    (b) Calculate the opportunity cost for cars in Japan and Germany. (c) If these countries were open to trade, which country would export clothes? Explain. (d) At what price should the two countries trade? Explain

Answer 1