You are given the information about production relationships between imagined country of "Wunderland" and the rest of the world. Input per bushel of rice Input per yard of cloth output 100 output Wunderland 75 Rest of the world 50 50 Taking several Ricardian assumptions where there are only 2 products of rice and cloth and perfect competition prevails in all markets, answer the following questions. 1. Does Wunderland have an absolute advantage in producing rice? Cloth? Explain showing you solution. 2. Does Wunderland have a comparative advantage in producing rice? Cloth? Explain showing your solution. 3. If no international trade is allowed, what price ratio would prevail for rice and cloth within Wunderland?

You are given the information about production relationships between imagined country of "Wunderland" and the rest of the world. Input per bushel of rice Input per yard of cloth output 100 output Wunderland 75 Rest of the world 50 50 Taking several Ricardian assumptions where there are only 2 products of rice and cloth and perfect competition prevails in all markets, answer the following questions. 1. Does Wunderland have an absolute advantage in producing rice? Cloth? Explain showing you solution. 2. Does Wunderland have a comparative advantage in producing rice? Cloth? Explain showing your solution. 3. If no international trade is allowed, what price ratio would prevail for rice and cloth within Wunderland?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter13: General Equilibrium And Welfare

Section: Chapter Questions

Problem 13.3P

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