Two countries (Home and Foreign) use labor to produce two goods: Cloth and Wheat. The number of units of the good that can be produced by one unit of labor are given below. The number of units of labor in the Home and Foreign countries are 10 and 30, respectively. (a) Calculate the opportunity costs of Cloth in the two countries, briefly describing your calculation. What are the goods in which the countries have comparative advantage? (b) Use appropriate examples for world price and indifference curves to show that both Home and Foreign benefit from trade. Mention the world price, and the points where production and consumption occur in the two countries after trade. Cloth Home Foreign Attach File Wheat 12 14 Browse Local Files Browse Content Collection
Two countries (Home and Foreign) use labor to produce two goods: Cloth and Wheat. The number of units of the good that can be produced by one unit of labor are given below. The number of units of labor in the Home and Foreign countries are 10 and 30, respectively. (a) Calculate the opportunity costs of Cloth in the two countries, briefly describing your calculation. What are the goods in which the countries have comparative advantage? (b) Use appropriate examples for world price and indifference curves to show that both Home and Foreign benefit from trade. Mention the world price, and the points where production and consumption occur in the two countries after trade. Cloth Home Foreign Attach File Wheat 12 14 Browse Local Files Browse Content Collection
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter2: Some Tools Of The Economist
Section: Chapter Questions
Problem 7CQ
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