Suppose we are considering a Ricardian model setting, where countries have not yet opened up to...
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Suppose we are considering a Ricardian model setting, where countries have not yet opened up to trade. Two goods are produced exclusively by domestic labor supplies, pint glasses and kegs of Guinness. Home and foreign maintain the following marginal productivities of labor (MPL) in produc- ing products. The two countries labor pools L= 100 are equal, meaning no differences in labor endowment. MPL Pint Glasses Guinness Home Foreign 7 14 Consider the autarky scenario where countries do not exchange goods. Complete the following questions to obtain the two countries consumption and production equilibria. 9 28 1) Which country has comparative advantage in producing pint glasses? 2) What are the max quantities of each good that Home and Foreign can produce? Max Output Pint Glasses Guinness Home Foreign 3) Sketch the PPFs of Home and Foreign in a single graph, given max output levels. Be sure to correctly label the graph for full points. 4) Suppose Home prefers using 3 pint glasses for every keg of Guinness consumed. Calculate the consumption bundle of Home and sketch it on a PPF graph. 5) Suppose Foreign tends to break glasses more frequently, leading them to consume 14 pint glasses per keg consumed. Calculate the consumption bundle of Foreign and sketch it on a PPF graph. 6) Consider a migrant boom occurs at home, where the workforce becomes 1= 120. Do comparative advantages change for either country? How does Home's production bundle change? Suppose we are considering a Ricardian model setting, where countries have not yet opened up to trade. Two goods are produced exclusively by domestic labor supplies, pint glasses and kegs of Guinness. Home and foreign maintain the following marginal productivities of labor (MPL) in produc- ing products. The two countries labor pools L= 100 are equal, meaning no differences in labor endowment. MPL Pint Glasses Guinness Home Foreign 7 14 Consider the autarky scenario where countries do not exchange goods. Complete the following questions to obtain the two countries consumption and production equilibria. 9 28 1) Which country has comparative advantage in producing pint glasses? 2) What are the max quantities of each good that Home and Foreign can produce? Max Output Pint Glasses Guinness Home Foreign 3) Sketch the PPFs of Home and Foreign in a single graph, given max output levels. Be sure to correctly label the graph for full points. 4) Suppose Home prefers using 3 pint glasses for every keg of Guinness consumed. Calculate the consumption bundle of Home and sketch it on a PPF graph. 5) Suppose Foreign tends to break glasses more frequently, leading them to consume 14 pint glasses per keg consumed. Calculate the consumption bundle of Foreign and sketch it on a PPF graph. 6) Consider a migrant boom occurs at home, where the workforce becomes 1= 120. Do comparative advantages change for either country? How does Home's production bundle change?
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Operations Management in the Supply Chain Decisions and Cases
ISBN: 978-0073525242
6th edition
Authors: Roger Schroeder, M. Johnny Rungtusanatham, Susan Goldstein
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