e. Is it possible for USA to gain by trading with Thailand? Explain.f. Is it possible for Thailand to gain by trading with USA? Explain.h. Do you think they can trade? (HINT: outside of PPF) In USA one unit of labor can produce 25 computers or 25 bushels of wheat. In Thailand one unitof labor can make 30 computers or 50 bushels of wheat. Assume that computers and wheat arethe only two goods in the world. (What is the purpose of this assumption?)

Theory of comparative advantage states that a country should produce those goods where it has lower…

Answered: e. Is it possible for USA to gain by…

e. Is it possible for USA to gain by trading with Thailand? Explain. f. Is it possible for Thailand to gain by trading with USA? Explain. h. Do you think they can trade? (HINT: outside of PPF)

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter17: International Trade

Section: Chapter Questions

Problem 1.2P

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Home has 12,000 units of labor available. It can produce two goods, apples and bananas. The unit labor requirement in apple production is 100, while in banana production is 75. There is now also another country, Foreign, with a labor force of 18,000. Foreign’s unit labor requirement in apple production is 120, while in banana production is 150. Graph Foreign’s PPF. Construct the world relative supply curve of banana. What will happen if Pa/Pb < 4/5? Graph the relative demand curve along with the relative supply curve of banana. Assume: Demand for apples/ demand for bananas =half of price of bananas/ price of apples What is the equilibrium relative price of banana?