Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

Hi i need help with this question whatever you get up to ill really appreciate it All parts are worth 6 points. Partial credit is

Hi i need help with this question whatever you get up to ill really appreciate it

image text in transcribedimage text in transcribedimage text in transcribed
All parts are worth 6 points. Partial credit is available with good work shown. CIRCLE YOUR ANSWERS AND ANSWER IN ORDER! Suppose France needs 5 units of labor to produce 1 unit of cheese (C), and 3 units of labor to produce 2 units of wine (W). Spain needs 6 units of labor to produce 1 unit of cheese, and 2 units of labor to produce 3 units of wine. Assume the marginal productivities of labor are constant in each country. Assume both countries have populations of 60 million. France has a Cobb-Douglas utility function of U(C,W)=C-2W.8,making its MUc=.2(W/C)- and MUw=.8(C/W).2. Spain has a Cobb-Douglas utility function of U(C,W)=C.W.4,making its MUc=.6(W/C).4 and MUw=.4(C/W).6. Throughout the problem, treat Cheese as the good on the X- axis. To make your notation easier, your numbers should be in millions of units when necessary. That is, if the answer to a question is "5 million units," then write down just "5." Finally, to facilitate grading, ANSWER IN ORDER AND CIRCLE YOUR ANSWERS.a.) Which good does France have a comparative advantage in producing? b.) What is the autarky price ratio in Spain? c.) Graph the PPFs for France and Spain. Be sure to indicate the slopes. d.) What is the MRS for France? e.) In autarky, how much cheese does France produce? f.) In autarky, how much wine does Spain consume? g.) What is Spain's utility level in Autarky? h.) If France and Spain have free trade, how many units of cheese will France produce? i.) How many units of cheese will France consume? This will be true at any price. j.) What will France's exports of cheese be? This will be true at any price. k.) How many units of cheese will Spain consume, as a function of the world price ratio P=Pc/Pw?1.) At what value of P will the market for cheese clear? That is, what is the international equilibrium price? m.) What is Spain's consumption of i) cheese and ii) wine? n.) What is Spain's utility after trade

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Entrepreneurship

Authors: Andrew Zacharakis, William D Bygrave

5th Edition

9781119563099

More Books

Students also viewed these Economics questions

Question

Why are ratios and trends used in financial analysis?

Answered: 1 week ago

Question

What is the effect of word war second?

Answered: 1 week ago