Question

this is autarky?

Answer questions 1 and 10 based on a global economy of two Ricardian economies (Home, Foreign) whose industry technologies are given in the following table: Product aLx 0.5 aLY = 1 Foreign a*x = 0.5 aLY Table 1: Labor hours per unit of outputs Each of these two economies is endowed with 500 labor hours (ie, L-L'-500).

Answer 1

Q11) option b)

a_L x^*/a_L y^* = 0.5/2 = 1/4 < a_L x/a_L y = 0.5/1 = 1/2, Thus foreign specializes in x, specializes in t, Now as p_x/p_y = 0.5, so foreign specializes (C.A) in x only & Home can produce any combination of x & y so foreign produces X^* = 500 times 0.5 = 1000 unit Home produces 100 y & exports & 400/0.5 = 800 x units Now trade price, p_x = 0.5 p_y so 1 unit of x equals 0.5 units of y, so if y = 100, then gain of x to home = 50 units Foreign gains Nothing of x, instead it pays 50 x units to import 100 y units from Home option d) 50 & zero Ans \r\n option b) International trade expands the consumption possibilities in each nation beyond its production possibilities in autarky . Thus PPC of trading partners doesn't shift outwards, PPC remains same, only Consumption possibilities are now outwards to PPC. option c is wrong Trade makes all nation to specialize in the good in which they have Comparative advantage, a is wrong & b is correct.

International trade expands the consumption possibilities in each nation beyond its production possibilities in autarky .

Thus PPC of trading partners doesn't shift outwards , PPC remains same , only Consumption possibilities are now outwards to PPC.option c is wrong

Trade makes all nation to specialize in the good in which they have Comparative advantage , a is wrong & b is correct.

Answer 12)

Option A)

International trade makes a country to specialize & expand the production of only that good , in which it has comparative advantage.

So nations shift from comparatively disadvantageos industries to comparatively advantageos ones