Essay about International Trade

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Chapter 2 1.Home has 1200 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. a.Graph out the production possibilities frontier: b.What is the opportunity cost of apples in terms of bananas? [pic] c.In the absence of trade, what would the price of apples in terms of bananas be? In the absence of trade, since labor is the only factor of production and supply decisions are determined by the attempts of individuals to maximize their earnings in a competitive economy, only when [pic]will both goods be produced. So [pic] 2.Home is as described in problem 1. There is now also another country, Foreign,…show more content…
Actually, trade with a less productive, low wage country can raise the welfare and standard of living of countries with high productivity, such as United States. So this pauper labor argument is wrong. 7.Japanese labor productivity is roughly the same as that of the United States in the manufacturing sector (higher in some industries, lower in others), while the United States, is still considerably more productive in the service sector. But most services are non-traded. Some analysts have argued that this poses a problem for the United States, because our comparative advantage lies in things we cannot sell on world markets. What is wrong with this argument? The competitive advantage of any industry depends on both the relative productivities of the industries and the relative wages across industries. So there are four aspects should be taken into account before we reach conclusion: both the industries and service sectors of Japan and U.S., not just the two service sectors. So this statement does not bade on the reasonable logic. 8.Anyone who has visited Japan knows it is an incredibly expensive place; although Japanese workers earn about the same as their U.S. counterparts, the purchasing power of their incomes is about one-third less. Extend your discussing from question 7 to explain this observation. (Hint: Think about wages and the implied prices of non-trade goods.) The

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