Question

Problems 30-71므 illustrate an example of trade induced by comparative advantage. They assume that China and France each have 1,000 production units. With one unit of production (a mix of land, labor, capital, and technology), China can produce either 10 containers of toys or 7 cases of wine. France can produce either 2 cases of toys or 7 cases of wine. Thus, a production unit in China is five times as efficient compared to France when producing toys, but equally efficient when producing wine. Assume at first that no trade takes place. China allocates 800 production units to building toys and 200 production units to producing wine. France allocates 200 production units to building toys and 800 production units to producing wine Problem 8 Fixed Rmb Pricing of the PT350 Plasma Cutting Torch Year Cost (Rmb) Margin (Rmb) Price (Rmb) Margin (percent Average Rate (Rmb/US$ Price (US$Percent Change in US$ Price 2007 16,000 2,000 18,000 7.61 2,365 2008 15,400 6.95 2009 14,800 6.83 2010 14,700 6.77 2011 14,200 6.46 2012 14,400 6.31 2013 14,600 6.15 2014 14,800 6.16 Cumulative 7. Trade at Negotiated Mid-Price. The mid-price for exchange between France and China can be calculated as follows. What happens to total production and consumption? Assumptions China-output per unit of production input France-output per unit of production input China-total production inputs France-total production inputs Toys (containers/unit) Wine (cases/unit) 10 7 2 7 1,000 1,000

Answer 1

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