Home has 1200 units of L and Foreign has 3600 of units of L available. Both...
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Home has 1200 units of L and Foreign has 3600 of units of L available. Both countries can produce coffee and cloth. The unit labour requirements for coffee and cloth in Home is 4 and 2 respectively. Likewise, it is 16 and 4 in Foreign. a. Write the equation and graph the PPF for both Home and Foreign. b. Which country has absolute advantage? Justify c. In which good does Home have a comparative advantage? Justify d. Construct the world RS curve. e. If there is free trade between the two countries, find equilibrium relative price of coffee, given Demand for Coffee/Demand for Cloth = Price of Coffee/Price of Cloth). f. Show pattern and gains from trade. Home has 1200 units of L and Foreign has 3600 of units of L available. Both countries can produce coffee and cloth. The unit labour requirements for coffee and cloth in Home is 4 and 2 respectively. Likewise, it is 16 and 4 in Foreign. a. Write the equation and graph the PPF for both Home and Foreign. b. Which country has absolute advantage? Justify c. In which good does Home have a comparative advantage? Justify d. Construct the world RS curve. e. If there is free trade between the two countries, find equilibrium relative price of coffee, given Demand for Coffee/Demand for Cloth = Price of Coffee/Price of Cloth). f. Show pattern and gains from trade.
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Answer rating: 100% (QA)
a The production possibilities frontier PPF for both Home and Foreign can be calculated using the unit labor requirements for coffee and cloth in each ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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