There are two countries in the world, France and Germany, and both can use workers to...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
There are two countries in the world, France and Germany, and both can use workers to produce either cheese or bread. France can produce either a ton of cheese or a ton of bread with 3 workers. Germany can produce a ton of cheese with 6 workers and a ton of bread with 3 workers. France has 120 workers; Germany has 150 workers. Initially, there is no trade between the two countries. 1. What is each country's cost of producing bread? Write the production possibilities frontier in the form that shows the cost of producing each good. 2. Draw the production possibilities frontier for each country. How much bread can France produce if it produces 10 tons of cheese? How much bread can Germany produce if it produces 10 tons of cheese? 3. What is the opportunity cost of producing bread for each country? 4. Suppose the relative price is 1.25 tons of cheese for 1 ton of bread. Are they willing to trade? If so, who exports bread? Who exports cheese? Assuming they do specialize and trade, draw the new PPF under trade for each country. 5. Suppose the relative price is 1.25 tons of bread for 1 ton of cheese. Are they willing to trade? If so, who exports bread? Who exports cheese? Assuming they do specialize and trade, draw the new PPF under trade for each country. 6. Suppose the price of bread in both countries is $1000/ton. Before the Treaty of Rome (meaning with no trade), what is the price of 1 ton of cheese in France? What is the price in Germany? 7. Suppose that after the Treaty of Rome (with trade) the price of bread remains at $1000/ton. What would be the price of cheese under the relative price in Question 4? How about under the relative price of Question 5? [Hint: If a country refuses to trade its price under trade is the same as under autarchy.] 8. Suppose that before trade France produced 30 tons of bread and 10 tons of cheese. Assuming all workers are paid the same wage and labor is the only input of production, what is the nominal wage before trade? What is the nominal wage after trade? 30 10 9. Suppose that the average French consumer buys 120 tons of bread and 120 tons of cheese. (This is 500 pounds of bread and 166.66 pounds of cheese. The French love their bread and cheese...) Assuming the year before trade is the base year, what is France's real wage before and after trade? There are two countries in the world, France and Germany, and both can use workers to produce either cheese or bread. France can produce either a ton of cheese or a ton of bread with 3 workers. Germany can produce a ton of cheese with 6 workers and a ton of bread with 3 workers. France has 120 workers; Germany has 150 workers. Initially, there is no trade between the two countries. 1. What is each country's cost of producing bread? Write the production possibilities frontier in the form that shows the cost of producing each good. 2. Draw the production possibilities frontier for each country. How much bread can France produce if it produces 10 tons of cheese? How much bread can Germany produce if it produces 10 tons of cheese? 3. What is the opportunity cost of producing bread for each country? 4. Suppose the relative price is 1.25 tons of cheese for 1 ton of bread. Are they willing to trade? If so, who exports bread? Who exports cheese? Assuming they do specialize and trade, draw the new PPF under trade for each country. 5. Suppose the relative price is 1.25 tons of bread for 1 ton of cheese. Are they willing to trade? If so, who exports bread? Who exports cheese? Assuming they do specialize and trade, draw the new PPF under trade for each country. 6. Suppose the price of bread in both countries is $1000/ton. Before the Treaty of Rome (meaning with no trade), what is the price of 1 ton of cheese in France? What is the price in Germany? 7. Suppose that after the Treaty of Rome (with trade) the price of bread remains at $1000/ton. What would be the price of cheese under the relative price in Question 4? How about under the relative price of Question 5? [Hint: If a country refuses to trade its price under trade is the same as under autarchy.] 8. Suppose that before trade France produced 30 tons of bread and 10 tons of cheese. Assuming all workers are paid the same wage and labor is the only input of production, what is the nominal wage before trade? What is the nominal wage after trade? 30 10 9. Suppose that the average French consumer buys 120 tons of bread and 120 tons of cheese. (This is 500 pounds of bread and 166.66 pounds of cheese. The French love their bread and cheese...) Assuming the year before trade is the base year, what is France's real wage before and after trade?
Expert Answer:
Answer rating: 100% (QA)
1 Frances cost of producing bread is 3 workerston Germanys cost of producing bread is also 3 workerston 2 PPF for France Tons of cheese 120 3tons of bread PPF for Germany Tons of cheese 150 6tons of bread If France produces 10 tons of cheese it can produce 30 tons of bread 120 310 30 If Germany produces 10 tons of cheese it can produce 20 tons of bread 150 610 20 3 Opportunity cost of producing bread for France is 3 tons of cheese Opportunity cost of producing bread for Germany is 6 tons of cheese 4 At a relative price of 125 tons of cheese for 1 ton of bread both countries will specialize and trade France will export bread and import cheese Germany will export cheese and import bread New PPF for France Tons of cheese 120 New PPF for Germany Tons of cheese 150 125tons of bread 5 At a relative price of 125 tons of bread for 1 ton of cheese there will be no trade 6 Price of cheese in France before trade is 1000ton as it costs 3 workers ... View the full answer
Related Book For
Posted Date:
Students also viewed these economics questions
-
Assume there are two countries in the world, Highland (H) and lowland (L). Both countries are initially self-sufficient in that they do not trade with each other, a condition called "autarky." Each...
-
Suppose that there are two countries in the world economy, countries I and II. The countries possess the following marginal propensities: MPCI = 0.7; MPMI = 0.1; MPCII = 0.8; MPMII = 0.2. There is no...
-
1. Estimate the model Debt = 30 + 1lnc + 32Unemp + . Is unemployment significant at the 5% level? 2. You are told that the unemployment rate might have a quadratic influence on monthly debt payments....
-
Harbaugh Manufacturing company uses a standard cost accounting system. In 2012, 50,000 units were produced. Each unit took several kilograms of direct materials and two standard hours of direct...
-
Determine the appropriate rotation formulas to use so that the new equation contains no xy-term. 13x 2 63xy + 7y 2 16 = 0
-
The transition obligation in accounting for postretirement health care benefits is the difference between: a. The accumulated postretirement obligation and the value of the assets funded to date. b....
-
The following information is available to reconcile Severino Co. s book balance of cash with its bank statement cash balance as of December 31, 2013. a. The December 31 cash balance according to the...
-
Examine the data from the following tables and answer the questions below: U.S. Department of Education, Office of Special Education Programs, Individuals with Disabilities Education Act (IDEA)...
-
Variable and fixed costs, profitability of order, opportunity cost Healthy Hearth specializes in lunches for health-conscious people. The company produces a small selection of lunch offerings each...
-
Parent Corporation's current-year taxable income included $100,000 net income from operations and a $10,000 net long-term capital gain. Parent also made a $5,000 charitable contribution. SubCo...
-
Predicting Used Car Prices (Bootstrap Forest and Boosted Trees). Return to the Toyota Corolla data, and refit the partition model. (Hint: Use the recall button in the partition dialog). This time,...
-
Does Early Language Reduce Tantrums? A recent headline reads "Early Language Skills Reduce Preschool Tantrums, Study Finds," and the article offers a potential explanation for this: "Verbalizing...
-
Define the difference between process and function and provide an example.
-
The variance process in the Heston model satisfy a CIR process: \[d V_{t}=\kappa\left(\bar{V}-V_{t} ight)+\sigma \sqrt{V_{t}} d W_{t}\] Use Ito to calculate the dynamics of the volatility process...
-
Explain the steps for the discovery of use cases.
-
A Company shows the following balances on its comparative financial statements: 2020 Inventory $12,000 $11,000 Accounts Receivable $6,300 $6,000 Accounts Payable $8,600 $8,200 The Company generates...
-
Define deferred revenue. Why is it a liability?
-
What is equilibrium in the ice cream model?
-
Write a couple of paragraphs about the state of the economy in the euro area over the past several years. What has happened to inflation, real GDP growth, and unemployment? What about a key policy...
-
Figure 12.1 presents a summary of the short-run model. Explain each step in this diagram. FIGURE 12.1 The Structure of the Short-Run Model MP curve IS Phillips curve curve Nominal interest rate, i...
-
Determine the state of stress at point \(A\) on the cross section of the post at section \(a-a\). Indicate the results on a differential element at the point. 5ft 400 lb a 1.5 ft 300 lb a 2.5 in. 2...
-
The rod has a diameter of \(40 \mathrm{~mm}\). Determine the stress components that act at point \(B\), and show the results on a volume element located at this point. 1500 N 300 mm 600 N 100 Nm 800...
-
Determine the state of stress at point \(B\) on the cross section of the post at section \(a-a\). Indicate the results on a differential element at the point. 5 ft 400 lb 1.5 ft 300 lb a a 2.5 in.- 2...
Study smarter with the SolutionInn App