We have two states: Apple State and Banana State. There are three homogeneous goods, one factor...

 

 

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We have two states: Apple State and Banana State. There are three homogeneous goods, one factor input (labor), and unit labor requirements are given in the following table. We assume that wage rate in Apple State is $3 and that in Banana State is $4. Two states agree to trade goods freely. Answer the following two questiona Units of labor required per unit of output Apple State Banana State Textile Fish Soybean 2 QUESTION 1 Under free trade without any trade friction and transportation cost, Apple State will produce Soybean, and Banana State will produce Textile and Fish. Is this statement true? True False QUESTION 2 Now, we assume that it costs $2 per unit to transport any goods between these two states. Please explain why Fish will not be traded. We have two states: Apple State and Banana State. There are three homogeneous goods, one factor input (labor), and unit labor requirements are given in the following table. We assume that wage rate in Apple State is $3 and that in Banana State is $4. Two states agree to trade goods freely. Answer the following two questiona Units of labor required per unit of output Apple State Banana State Textile Fish Soybean 2 QUESTION 1 Under free trade without any trade friction and transportation cost, Apple State will produce Soybean, and Banana State will produce Textile and Fish. Is this statement true? True False QUESTION 2 Now, we assume that it costs $2 per unit to transport any goods between these two states. Please explain why Fish will not be traded.

Answer rating: 100% (QA)

1 Yes the satement is trueAs the cost incurred by the Apple state for producing a unit of Soyabeen i... View the full answer