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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

France and Tunisia both have Mediterranean climates that are excellent for producing/harvesting green beans and tomatoes. In France it takes two hours for each worker to harvest green beans and two hours to harvest a tomato. Tunisian workers need only one hour to harvest the tomatoes but four hours to harvest green beans. Assume there are only two workers, one in each country, and each works 40 hours a week.

a. Draw a production possibilities frontier for each country. Hint: Remember the production possibility frontier is the maximum that all workers can produce at a unit of time which, in this problem, is a week.

b. Identify which country has the absolute advantage in green beans and which country has the absolute advantage in tomatoes.

C. Identity which country has the comparative advantage.

d. How much would France have to give up In terms of tomatoes to gain from trade? How much would it have to give up in terms of green beans?

a.

To determine

To draw: The production possibilities frontier for each country.

Explanation

The given information is below:

    CountryGreen BeansTomatoTotal Hours Available per week
    France  2 hours  2 hours  40 hours
    Tunisia  4 hours  1 hours  40 hours

Now, based on this table, the following is the production table of each country for a week:

b.

To determine

The absolute advantage in green beans and tomatoes among the two countries is to be determined.

c.

To determine

To identify: The country having the comparative advantage.

d.

To determine

To calculate: The amount of trade in the terms of tomatoes and green beans to earn from the trade

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