1. As costs and unit work necessity are same in every one of the spots with the end goal that products are created at most minimal costs, nations are profited by profession.
2. As the prerequisite of work in making wine and fabric is lower for Portugal, it has outright favorable position underway of both wine and material.
Opportunity cost of making wine in Britain is (1/100)/(1/120) = 120/100 = 1.2
what's more, open door cost of making wine in Portugal is (1/90)/(1/80) = 80/90 = 0.89
As happenstance cost of making wine is lower for Portugal, it has near preferred standpoint in the generation of wine.
Essentially, opportunity cost of making fabric in Britain is (1/120)/(1/100) = 100/120 = 0.83
what's more, open door cost of making material in Portugal is (1/80)/(1/90) = 90/80 = 1.1
As happenstance cost of making material is lower for Britain, it has near favorable position in the creation of fabric.
3. In the event that w=100/100=1, the two nations won't consent to exchange.
4.If w=90/120 = 0.75, the two nations will consent to exchange.
5. In the event that w=60/120 = 0.5, the two nations won't consent to exchange.
Revisiting Ricardo's Example Ricardo (1817) posited a world of two countries, England and Portuga...
Consider a two countries, Portugal and England, that produce two goods, wine and cheese, with only one factor of production, Labor. In England, one unit of labor can produce 2 units of wine or 1 unit of cheese. In Portugal, one unit of labor can produce 3 units of wine or 1/2 of cheese. There are 100 units of labor in Portugal, and 100 in England. Countries share the same tastes, and there is perfect competition. 1) Fill in the...
8. In 1821 David Ricardo wrote that: England may so circumstanced, that to produce the cloth may require the labour of 100 men for one year, and if she attempted to make the wine, it might require the labour of 120 men for the same time...To produce the wine in Portugal, might require only the labour of 80 men for one year, and to produce the cloth in the same country, might require the labour of 90 men for the...
Consider two countries that produce cloth and widgets with labour as the unique production factor using a linear technology. Given the following information: Unit Produced by One Worker/Hour Cloth Widgets Home 200 400 Foreign 120 60 i. What is the opportunity cost of cloth in terms of widgets for the Home country? For the Foreign country? (5 points) ii. In which good does the Home country have comparative advantage? Why? (5 points) ii. Assume that on the world market one...
27. Given the following Ricardo-type table showing the labor input required per unit of put in each of the two industries in each of the two countries Shirts Brandy 5 days 12 days United States France 10 days 6 days If the countries engage in trade at post-trade prices (terms of trade) of 1 shirt 0.5 brandy, then A) France gets all the gains from trade B) the United States gets all the gains from trade C) neither country gains...
QUESTION 6 The first example of comparative advantage appeared in a book that was published in 1817. This example showed that mutually beneficial trade between two countries (England and Portugal) was possible. The example assumed that two goods (wine and cloth) could be produced by both countries. Which of the following describes the conclusion of this example? Portugal had a comparative advantage in both wine and cloth, but its advantage in cloth was greater. Portugal had a comparative advantage in...
Part a: According to Adam Smith's law of absolute advantages and David Ricardo's law of comparative advantages: A. if one country has an absolute or comparative advantage over another country in producing one or more goods, then if the country with the advantage specializes in making this good it will raise total world output. B. if a country has an absolute advantage in producing a good over another country, then it increases total world output if this country specializes in...
Davis Ricardo was the first economist to elaborate the theory if comparative advantage in his book On the Principles of Political Economy and Taxation. Under a system if perfectky free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each. This pursuit of individual advantage is admirably connected with the universal good of the whole... It is this principle, which determines that wine shall be made in France and Portugal, that corn...
avid Ricardo was the first economist to elaborate the theory of comparative advantage in his book On the Principles of Political Economy and Taxation. Ricardo wrote: Under a system of perfectly free commerce, each country naturally devotes its capital and labour to such employments as are most beneficial to each. This pursuit of individual advantage is admirably connected with the universal good of the whole . . . It is this principle, which determines that wine shall be made in...
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...
Assume two countries Argentina and Brazil that produce two goods, corn and wine. Assume that land is specific to corn, capital is specific to wine, and labor is free to move between the two industries. Assume that Brazil has a comparative advantage in corn, and Argentina has a comparative in wine. Brazil and Argentina sign a free trade agreement, and we want to study the consequences of this trade agreement. a) Is it possible that real wages move in opposite...