Two countries, Pakistan and India, produce two commodities: apples and mangoes. The amount of each commodity produced per hour, in kg, for Pakistan is: 6 apples, and 6 mangoes. Meanwhile, it is 5 apples and 4 mangoes for India. a.) What is the opportunity cost for mangoes in the two countries? How does it differ from relative price? b.) What is the principle of comparative advantage? Which country has comparative advantage in apples? c.) Suppose that apples and mangoes are exchanged internationally at a rate of 0.9 mangoes per apple. Which country will export apples and why? Assuming both countries have 180 hours of labour each, draw the PPFs of both nations to illustrate the answer, and explain why both countries are better off after the trade.
Two countries, Pakistan and India, produce two commodities: apples and mangoes. The amount of each commodity produced per hour, in kg, for Pakistan is: 6 apples, and 6 mangoes. Meanwhile, it is 5 apples and 4 mangoes for India. a.) What is the opportunity cost for mangoes in the two countries? How does it differ from relative price? b.) What is the principle of comparative advantage? Which country has comparative advantage in apples? c.) Suppose that apples and mangoes are exchanged internationally at a rate of 0.9 mangoes per apple. Which country will export apples and why? Assuming both countries have 180 hours of labour each, draw the PPFs of both nations to illustrate the answer, and explain why both countries are better off after the trade.
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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Two countries, Pakistan and India, produce two commodities: apples and mangoes. The amount of each commodity produced per hour, in kg, for Pakistan is: 6 apples, and 6 mangoes. Meanwhile, it is 5 apples and 4 mangoes for India.
a.) What is the
b.) What is the principle of
c.) Suppose that apples and mangoes are exchanged internationally at a rate of 0.9 mangoes per apple. Which country will export apples and why? Assuming both countries have 180 hours of labour each, draw the PPFs of both nations to illustrate the answer, and explain why both countries are better off after the trade.
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