Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Suppose two economies Home (H) and Foreign (F) produce two goods, bread and wine, with only one production factor: labour. Production technologi', expressed as marginal

image text in transcribedimage text in transcribed
image text in transcribedimage text in transcribed
Suppose two economies Home (H) and Foreign (F) produce two goods, bread and wine, with only one production factor: labour. Production technologi', expressed as marginal product of labour (MPL), is given in the following table: Technologies expressed as MPL\" Home Foreign *Note that technologies are expressed as Marginal Products of Labour {MPLJ not as unit labour requirements. To learn how these two measurements of labour productivity relate, please consult the material covered in class and the textbook. Suppose that Home has 2400 units of labour and Foreign has 1800 units of labour. a. [2 marks} Derive the Production Possibilities Frontier (PPFi and the Consumption Possibilitv Frontier (CPF) for Home and Foreign, with bread on the horizontal axis and wine on the vertical axis. What is the autarkv equilibrium price of bred relative to wine in each countrv? b. (2 ma rks] What country has the absolute advantage in producing each good? What country has the comparative advantage in producing each good? Briefly explain the difference between these two concepts. Suppose both countries are now free to trade. The world relative price of bread is 1. c. (2 marks) What is the pattern of specialisation and trade? Briefly explain your answer. d. (2 marks) To the graphs you drew in point {a} add the EFF after free trade. Which country gains from free trade according to Ricardian Model. Briefly explain your

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

Law Express Criminal Law

Authors: Emily Finch, Stefan Fafinski

8th Edition

1292295414, 978-1292295411

More Books

Students also viewed these Law questions

Question

Do not pay him, wait until I come

Answered: 1 week ago

Question

Do not get married, wait until I come, etc.

Answered: 1 week ago

Question

Do not come to the conclusion too quickly

Answered: 1 week ago