A. Use the following information is from the autarkic state in Home. Home Country WTV =...

 

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A. Use the following information is from the autarkic state in Home. Home Country WTV = 12 MPLTY = 2 Pry=? B. Now consider the free trade situation. Wear =? MPL car =? Pear = 4 a) You now know that the relative price of cars in Foreign is = 2. Which good will each P car P'TV country export? Explain why. trade PTV b) Suppose the world relative price of televisions in the trade equilibrium is What is the real wage in Home in terms of cars in the trade equilibrium? c) What is the real wage in Home in terms of televisions in the trade equilibrium? d) How can you conclude Home is better off because of trade? (hint: check the real wage) car. = 1. C. We draw graphs for the Home country. Assume there are 100 workers. a) Draw PPF. Put TVs on the y-axis and cars on the x-axis. Confirm that the negative of the slope of PPF is equal to the negative of the opportunity cost of a car (again, we have cars on the x-axis). b) Assume Home produces 150 cars under autarky and draw a point for the production in the graph you draw in part (a). How many televisions does Home produce? Also, draw the indifference curve. c) Now consider Home opens up to trade. Draw the price line under free trade in the figure trade PTV = 1. you have. Again, Pear d) How many cars and televisions does Home produce under free trade? e) Assume Home consumes 180 cars and 120 televisions. Draw the indifference curve under free trade in the figure. Does Home gain from trade? f) Please describe the trade pattern in words. How many cars and television are trading? A. Use the following information is from the autarkic state in Home. Home Country WTV = 12 MPLTY = 2 Pry=? B. Now consider the free trade situation. Wear =? MPL car =? Pear = 4 a) You now know that the relative price of cars in Foreign is = 2. Which good will each P car P'TV country export? Explain why. trade PTV b) Suppose the world relative price of televisions in the trade equilibrium is What is the real wage in Home in terms of cars in the trade equilibrium? c) What is the real wage in Home in terms of televisions in the trade equilibrium? d) How can you conclude Home is better off because of trade? (hint: check the real wage) car. = 1. C. We draw graphs for the Home country. Assume there are 100 workers. a) Draw PPF. Put TVs on the y-axis and cars on the x-axis. Confirm that the negative of the slope of PPF is equal to the negative of the opportunity cost of a car (again, we have cars on the x-axis). b) Assume Home produces 150 cars under autarky and draw a point for the production in the graph you draw in part (a). How many televisions does Home produce? Also, draw the indifference curve. c) Now consider Home opens up to trade. Draw the price line under free trade in the figure trade PTV = 1. you have. Again, Pear d) How many cars and televisions does Home produce under free trade? e) Assume Home consumes 180 cars and 120 televisions. Draw the indifference curve under free trade in the figure. Does Home gain from trade? f) Please describe the trade pattern in words. How many cars and television are trading?

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A Given information WTV 12 The wage rate in terms of televisions Wear The wage rate in terms of cars MPLTV 2 The marginal product of labor in the production of televisions MPLcar The marginal product ... View the full answer