There is a foreign country with L* = 20,000 workers. Each of their workers can produce either 100 units of X per month or 10
There is a foreign country with L* = 20,000 workers. Each of their workers can produce either 100 units of X per month or 10 units of Y.
Draw the foreign country’s PPF and calculate its slope. Assuming it also produces at autarky with half of its labor producing X and the other half producing Y, how much can it consume of each (CX*, CY*)? Show this point with an indifference curve.
Assume that the foreign price PX* equals 1 mark, the foreign currency. How much is PY*, in marks? How much is the wage in each sector (WX*, WY*), in marks?
Comparing your country to the foreign country, which country has the comparative advantage in textiles? Which has it in food?
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Authors: Morgan Swink, Steven Melnyk, Bixby Cooper, Janet Hartley
2nd edition
9780077535063, 007802403X, 77535065, 978-0078024030
