Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please help me with this question: Suppose there are two countries: Canada and Japan, each producing 2 goods: cars and wheat. The only input they

Please help me with this question:

Suppose there are two countries: Canada and Japan, each producing 2 goods: cars and wheat. The only input they have is labour. Suppose both countries have 10 million workers. A Canadian worker can produce 10 tonnes of wheat per year or 4 cars. A Japanese worker can produce either 5 tonnes of wheat or 4 cars.

  1. Make a table of output per worker from the information in the question. Which country has an absolute advantage in Wheat? Cars? Explain why?
  2. Use the above information to draw the PPF of each country separately. If each country chooses to remain self-sufficient and devotes half its labour towards each good, how much of each good will be produced. Show this point on the PPF graph.
  3. Construct a table to show the opportunity cost of each country for each of the goods they produce. Which country has a comparative advantage in Wheat? Cars? Explain Why?
  4. Using the information in the question, what price of wheat and cars will make trade beneficial for both countries if they choose to engage in trade? Explain as much as possible and you can give a range of prices if it is not possible to give the exact price.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored 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

Global Marketing

Authors: Johny K Johansson

4th Edition

0072961805, 9780072961805

More Books

Students also viewed these Economics questions