Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1) Suppose that a worker in Boatland can produce either 5 units of wheat or 25 units of sh per year, and a worker in

image text in transcribed
1) Suppose that a worker in Boatland can produce either 5 units of wheat or 25 units of sh per year, and a worker in Farmland can produce either 25 units of wheat or 5 units of sh per year. There are 10 workers in each country. Political pressure from the fish lobby in Farmland and 'om the wheat lobby in Boatland has prevented trade between the two countries on the grounds that cheap imports would kill the sh industry in Farmland and the wheat industry in Boatland. As a result, Boatland produces and consumes 25 units of wheat and 125 units of sh per year while Farmland produces and consumes 125 units of wheat and 25 units of sh per year. If the political pressure were to overcome and trade were to occur, each country would completely specialize in the product for which it has a comparative advantage. a) Which country has absolute advantage in producing sh? In producing wheat? b) Which country has comparative advantage in producing sh? In producing wheat? c) If Boatland and Farmland trades with each other, which commodity will Boatland trade to the Farmland? Which commodity will Farmland trade to Boatland? Why? d) What would be the increase in the combined output of these countries if they start trading with each other? (Hint: relative to the situation they do not trade.) e) The price of wheat can be expressed in terms of sh. What is the price range of wheat (in terms of sh) at which trade can occur? Briey explain why

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Economics Of The Sulphur Industry

Authors: Jared E Hazleton

1st Edition

1317353927, 9781317353928

More Books

Students also viewed these Economics questions

Question

Always have the dignity of the other or others as a backdrop.

Answered: 1 week ago