3. Suppose that Home and Foreign are the only countries in the world and that labor...
1a. Suppose that each worker in Home can produce 2 pound of cheese or 3 gallons of wine. Assume that Home has 40 workers. a. Graph the production possibilities frontier (PPF) for Home? What is the no-trade relative price of cheese in Home? Why? b. Suppose that each worker in Foreign can produce 1 pounds of cheese or 2 gallons of wine. Assume that Foreign also has 40 workers. Graph the PPF for Foreign? What is the no-trade relative price...
(a) Draw the PPF for Home and for Foreign (on separate graphs). Put production of food on the x-axis. 5 (b) Which country has the comparative advantage in food production? Which has the comparative advantage in drink production? (c) Draw the world supply of food relative to drinks (the world relative supply curve) (d) Suppose that the PF ood = $2/pound, and PDrinks = $5/gallon. Draw new PPFs for Home and Foreign after trade is allowed. How can we tell...
3. Home has 1.200 units of labor available. It can produce two goods, apples and bananas. The unit labor requirement in apple production is 3. while in banana production it is 2. Foreign has 800 units of labor available. Foreign's unit labor requirement in apple production is 5. while in banana production it is 1. a Graph the production possibility frontier for Home and the production possibility frontier for Foreign Please put Apples on the y axis. Now suppose world...
2. Suppose that Home and Foreign consumers have the same preferences over these two goods, and they are represented by the following utility function: U(Q ,Q ) = Q1/3Q2/3. cwcw a. Graph the consumer budget line of the Home country and add indifference curves to the figure. Find the amount of cheese and wine that people in Home country consume in the no-trade equilibrium? b. Graph the consumer budget line of the Foreign country and add indifference curves to the...
Consider a world with two countries, Home and Foreign, both able to produce two goods: cloth and tablet computers. The production of both goods uses capital and labor in fixed proportions, with the tablets industry using more capital per worker than the cloth industry. The units of each input needed to produce one unit output are given by: capital Labor Cloth 1 2 Tablets 2 1 Both countries have 150 units of capital available for production, but the Home country...
Answer question 4 based on previous information. 1. Suppose that each worker in the home country can produce three loaves of bread or two shirts. Assume that Home has four workers a. Graph the production possiblities frontier for the Home country. b. What is the no-trade relative price for bread at Home? 2. Suppose that each worker in the Foreign country can produce two loaves of bread or three shirts. Assume that Foreign also has four workers. a. Graph the...
Home Foreign Marginal Products Cheese 6 2 Wine 4 3 Labor Force 100 200 1.Suppose the relative price of wine increases from 1 to 1.25. Draw the home country’s new consumption possibilities frontier. 2. Suppose foreign’s marginal product of labor in producing wine decreases from 3 to 1 due to a disease that is affecting foreign grapes. Sketch the effect that this will have on the world supply curve for wine. Label your axes and provide numerical values. 3.Sketch...
Problem 1 BICYCLES SKATEBOARDS HOME 5(hrs) 2(hrs) FOREIGN 3(hrs) 3(hrs) HOME has 1000 hours of labour available.FOREIGN has 1200 hours of labour available.a. Draw the production possibility frontier for Home and Foreign. b. In the absence of trade, what is the relative price of bicycles in terms of skateboards in each country? c. Draw the world production possibility frontier clearly showing the case of specialization in comparative advantage and comparative disadvantage. d. Trade is said to make each country better off by enlarging the...
Only the question a Consider two countries (Home and Foreign) that produce goods 1 (with labor and capitalj and 2 twith labor and land) according to the production functions described in problems 2 and 3 Initially, both countries have the same supply of labor (100 units each), capital, and land The capital stock in Home then grows. This change shifts out both the production curve for good 1 as a function of labor employed (described in problem 2) and the...
7. Assume that Home and Foreign produce two goods, TVs and cars, and use the information below to answer the following questions: In the No-Trade Equilibrium Home Foreign Wagerv = 12 Wagec = ? Wageiv=? Wagec = 6 MPLT=4 MPL = ? MPLiv=? MPL = 1 Prv=? Pc=4 Piv=8 P = ? a. What is the marginal product of labor for TVs and cars in Home? What is the no- trade relative price of TVs in Home? b. What is...