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Hello, can you please show which statement is true, and how to get that. Suppose countries A and B produce and consume (assuming convex preferences)
Hello, can you please show which statement is true, and how to get that.
Suppose countries A and B produce and consume (assuming convex preferences) apples and bananas using only labour. Unit labour cost for apples in country A are 1 and 2 in country B. Unit labour cost for bananas are 2 in country A and 5 in country B. The labour force is the same in both countries, and given by 100 in each country. Which three of the following statements are true?
- A: Allowing for international trade, the production of 50 apples and 50 bananas is feasible, but not under autarky.
- B: Under autarky, the relative price for apples (price for apples/price for banans) equals 0.5 in country A and 0.4 in country B.
- C: Country B has a comparative advantage in producing bananas.
- D: Allowing for international trade, the production of 50 apples and 50 bananas can occur in a global market equilibrium feasible, but not in market equilibria under autarky.
- E: Country A will produce bananas, with or without international trade.
- F: Each country has an absolute advantage.
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