Question
Please show workings and calculations France and Australia both produce only lavender and grapes. Each country has 3,600 labourers. In one month, France can produce
Please show workings and calculations
France and Australia both produce only lavender and grapes. Each country has 3,600 labourers. In one month, France can produce either 900 tonnes of lavender or 300 tonnes of grapes. Australia can produce either 600 tonnes of lavender or 150 tonnes of grapes. The countries can also devote labourers to both industries in order to produce and consume both goods.
Suppose that initially, France and Australia decide to allocate workers to both types of production. France is currently consuming 300 tonnes of lavender and 200 tonnes of grapes, while Australia is consuming 200 tonnes of lavender and 75 tonnes of grapes.
Please answer the questions with the standard of long questions that require calculation.
Part a) Which country has an absolute advantage in producing lavender? Grapes?
Part b) Which country has a comparative advantage in producing lavender? Grapes?
Part c) If they agree to specialize and trade, what will France produce? What will Australia produce?
Part d) If the countries agreed to exchange 350 tonnes of lavender for 90 tonnes of grapes, calculate the gains to specialization and trade for each country.
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