Solve the problem below (comparative advantage). The goal is to work through the math. Explain in detail. The scenario-Exchanging Wine for Fabric (two state economy w/ no transaction costs or currency exchange issues) 1 Bolt of fabric = 100 hours of French labor 90 hours of Spanish labor 1 pipe of wine = 120 hours of French labor 60 hours of Spanish labor France Spain Fabric 100 90 Wine 120 60 Opportunity Costs France-labor to produce 1 bolt of fabric = labor to produce .8 pipes of wine. Spain-Labor to produce 1 bolt of fabric = labor to produce 1.50 pipes of wine. Spain has an absolute advantage in the production of both commodities-should it trade with France?
Solve the problem below (comparative advantage). The goal is to work through the math. Explain in detail. The scenario-Exchanging Wine for Fabric (two state economy w/ no transaction costs or currency exchange issues) 1 Bolt of fabric = 100 hours of French labor 90 hours of Spanish labor 1 pipe of wine = 120 hours of French labor 60 hours of Spanish labor France Spain Fabric 100 90 Wine 120 60 Opportunity Costs France-labor to produce 1 bolt of fabric = labor to produce .8 pipes of wine. Spain-Labor to produce 1 bolt of fabric = labor to produce 1.50 pipes of wine. Spain has an absolute advantage in the production of both commodities-should it trade with France?
Chapter13: General Equilibrium And Welfare
Section: Chapter Questions
Problem 13.3P
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Transcribed Image Text:Solve the problem below (comparative
advantage). The goal is to work through the math.
Explain in detail.
The scenario-Exchanging Wine for Fabric (two
state economy w/ no transaction costs or currency
exchange issues)
1 Bolt of fabric =
o 100 hours of French labor
o 90 hours of Spanish labor
1 pipe of wine =
o 120 hours of French labor
o 60 hours of Spanish labor
France
Spain
Fabric
100
90
Wine
120
60
Opportunity Costs
France-labor to produce 1 bolt of fabric = labor
to produce .8 pipes of wine.
Spain-Labor to produce 1 bolt of fabric = labor to
produce 1.50 pipes of wine.
Spain has an absolute advantage in the
production of both commodities-should it trade
with France?
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