Question
Assume that there are two countries which can produce two goods, burgers (B) and fries (F), using labour as the only production factor. Workers in
Assume that there are two countries which can produce two goods, burgers (B) and fries (F), using labour as the only production factor. Workers in both countries eat both burgers and fries. There are 1 million workers in country 1, and 2 million workers in country 2.
The marginal products of labour (MPLs) in each country are given in the following table:
MPL of burgers (in tons) MPL of fries (in tons)
country 1 MPLB = 1 MPLF = 2
country 2 MPL*B = 3 MPL*F = 4
Now imagine that the population of country 1 increases by 50% whereas the population of country 2 reduces to a fifth of its original size. Describe how the two countries' comparative advantages change. Explain your answer.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started