Question

7. Problems and Applications Q7 A German worker takes 400 hours to produce a car and 2 hours to produce a case of wine. A French worker takes X hours to produce a car and 3 hours to produce a case of wine For what values of X will gains from trade be possible? Check all that apply. 650 700 For what values of X will Germany export cars and import wine? Check all that apply 650

I need the values of x for each question and could you explain how you came up with it? thanks!

Answer 1

Answer a) all options are right.

If two countries have identical opportunity costs for two goods, then the countries do not stand to gain from trade with one another for the goods in question

Now X should not be equal to 600, bcoz then both nations will have identical opportunity cost of production.

So if X>600 , then Germany will export car & France export wine

If X< 600 , Germany will export wine & France will export car.

For trade to be beneficial, the terms of trade should lie between the autarky opportunity costs of two nations