Question 65 Questions
Referring to Exhibit 29-4, suppose you are given the following information about the production of two goods in two countries. (A)
| Who has an absolute advantage in the production of each good? A
| Find the opportunity cost of producing bananas in each country.A: banan 6/12 = 0,5 radio 2B: banan 2/8 = 0,25 radio 4
| Who has a comparative advantage in banana production?Country B.
Suppose the post-trade relative price is 1/3 radio per banana, or equivalently 1 radio per 3 bananas. Based on the information in Exhibit 29-4, demonstrate the gains from trade to each country by assuming each takes 10 units of labor from the production of one good, moves the units of production to the other good, and trades the extra production with the other country.
A: loose 120 bananas and produce 60 radios
They exchange it for 60*3 = 180
B: loose 20 radios and get 80 bananas
They exchange it for 80*1/3 = 26,66
Answer the questions below:
| Suppose country A has 100 units of labor and country B has 200 units of labor. Based on the information in Exhibit 29-4, draw the production possibilities curve for both countries, with radios on the horizontal axis. What is the slope of each curve?
| Suppose the posttrade relative price is 1/3 radio per banana, or equivalently 1 radio per 3 bananas. Draw the posttrade production possibilities curve for each country and identify the production point for each country.
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