INSTRUCTIONS:

Be clear and concrete in your analysis Interpret your calculations

Germany and France produce Televisions (T) and Microwaves (M). Both products are produced with labor only. The following table shows the unit labor requirements (hours per unit produced) for each product in each country.

	Televisions	Microwave
Germany		1
France		1

For each country, calculate the opportunity cost of the television set in terms of microwaves and the opportunity cost of the microwave in terms of televisions, and indicate where it is cheaper to produce televisions and where it is cheaper to produce microwaves.

Between what values must the price of the TV set be in terms of microwave (PT /P_M ) for trade to take place between Germany and France.

Calculate the wage level for each country. [Hint: for this you must make some assumptions such as setting a value for the price of the TV set in terms of microwave, and with this, set the price (in $) of the TV set (P_T ) and the price (in $) of the microwave (P_M ).]

With 3), calculate the costs (in $) for each product in each country. With this result, explain the cost advantage that each country has for exporting a given product.