There is a foreign country with L* = 20,000 workers. Each of their workers can produce either
Question:
There is a foreign country with L* = 20,000 workers. Each of their workers can produce either 100 units of X per month or 10 units of Y.
Draw the foreign country’s PPF and calculate its slope. Assuming it also produces at autarky with half of its labor producing X and the other half producing Y, how much can it consume of each (CX*, CY*)? Show this point with an indifference curve.
Assume that the foreign price PX* equals 1 mark, the foreign currency. How much is PY*, in marks? How much is the wage in each sector (WX*, WY*), in marks?
Comparing your country to the foreign country, which country has the comparative advantage in textiles? Which has it in food?
Managing Operations Across the Supply Chain
ISBN: 978-0078024030
2nd edition
Authors: Morgan Swink, Steven Melnyk, Bixby Cooper, Janet Hartley