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7. Consider a world in which there are two countries: Big Industrialized Country (BIC) and Small Developing Country (SDC). BIC has a labor force of
7. Consider a world in which there are two countries: Big Industrialized Country (BIC) and Small Developing Country (SDC). BIC has a labor force of 500,000 and SDC has a labor force of 240,000. There are two types of goods in this world -food (F) and manufactures (M), and they are both produced using only labor. The technology for producing each of these goods in each country is described by the unit labor requirements in the following table: Food Manufactures BIC 5 SDC 40 (a) Sketch the production possibilities frontier (PPF) for each country here. QM QM QF QF BIC SDC (b) Calculate the opportunity cost and relative autarky price of food in each country. Then determine the goods in which each country has an absolute and comparative advantage. Record your answers in the table below. BIC SDC Opportunity Cost (PF/PM) in autarky Absolute Advantage in: Comparative Advantage in:[d] Assuming the countries do trade, and that the free trade price is PFJWOrEd P =03, what will the pattern of specialization be? M BIC produces SDC produces {f} Sketch and label the consumption possibility frontiers after trade on the graphs in part {a}. [g] Do both countries gain from trade? Expiain briey, using the graphs from {a} as a reference. 3. Identify some relevant determinants of trade intensityr between two countries. 9. Use the comparative advantage concept to explain the existence of global value chains. It}. Regarding global supply chains, explain the tradeoff between production efficiencyr and global resilience. 11. Discuss the role of technological progress and political pressures on the future of globalization
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