Suppose that country A has 20,000 worker-hours available for production and that it initially has the technology given by case 4 of Exercise 1.

data from case 4 of the exercise 1

 

Derive its PPF and determine its exact dimensions. Now, suppose that scientists in A develop a technology that doubles labor productivity in producing good S. What would happen to A’s PPF? Derive and explain. What would happen to the pattern of comparative advantage? Derive and explain.

Data from in exercise 1 1. 

For each of the following cases below determine the following:

(a) the pretrade relative prices;

(b) the direction of comparative advantage; and

(c) the limits to the relative wage rate.

Transcribed Image Text:

Case 4 A B S 4 9 T 2 3