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Sweden has 400 workers and 600 machines. Italy has 400 workers and 400 machines. Factor requirements per unit of output are fixed as follows: workers
Sweden has 400 workers and 600 machines. Italy has 400 workers and 400 machines. Factor requirements per unit of output are fixed as follows:
workers
machines
Ball bearings
4
10
Shoes
6
5
Calculate each country's full employment output combination. Suppose that demand conditions are the same in both countries and that free trade leaves them at their full-employment output points. Which country will export shoes? Illustrate your answer using transformation curves and trade triangles.
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