Question

00:22 HB $BA (International Economics) The Ricardian Model: Trade Pattern 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 a labor force of 800. Foreign's unit labor requirement in apple production is 5, while in banana production it is 1. a. What is the opportunity cost of apples in terms of bananas in Home? b. What is the opportunity cost of apples in terms bananas in Foreign? c. In the absence of trade, what would the price of apples in terms of bananas be?Why? d. After trade, which price would be possible? 2 or 6? e. Describe the pattern of trade. f. Using the price you have chosen in question d, show that both Home and Foreign gain from trade. 081 见附件 International Economics 3(SOPO... TA 教师评语

Answer 1

Ans.

Before & after trade Y Home foreign gools foot 400 apple 160 400 In a. - home t h e cost u obbastitunity i of 400 apple = 6ooban i abble - 600 z758 40 cínana b. In foreign t o cost of 160 eubbortunity çus_ L apple = 800 Banana 1 -5-Banana C. In the absence of drade - in chome lapple = 1.5 banana - in foreign L = 5 banana. Here dadde is not done to their respect the opportunity cost of their price (d) with trade in home Price of 400 apple = 800 bananas " I " = 80 -2 + er Both the countries will be better of after trade. Home Country has lower opportunity cost of apple, so it will specialise in production of abble, and oxbart it to fareigh. Similarly foreign will! enbart banana to home country. TD