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Two good Ricardiau littiestiiin. Assume there are three countries in the world {Canada, Japan, and the United States}, and they can produce two goods {wheat,
Two good Ricardiau littiestiiin. Assume there are three countries in the world {Canada, Japan, and the United States}, and they can produce two goods {wheat, ears }. There is l units of labor available in each country. and the unit labor requirements for production of these goods and countries are given in the table below. Countries II.|'I.I'heat Cars Endowment a} Canada has a comparative advantage in what good? Japan has comparative advantage In what good? II.|I.I'hat does the US have comparative advantage In? the careful here}. Is: Graph the worid production possibility frontier. Put cars on the vertical axis. c} Graph the world relaine supply curve of cars to wheat {on the horizontal aids: agalnst the relatlve price of cars to wheat on the vertical axis. Label all the itlnk points carefully and eupilcltly. Label both axis carefully. d: Suppose tastes are Identical across countries and the relative demand for cars to wheat depends only on relative prices. Illustrate by use of {several} relative demand curves the set of possible outcomes for the trading equilibrium among Canada, Japan, and the United States. e] Explain the production In each country, their trade patterns, and the gains from trade for each country In each of the potential equlllbria you found In d]. f: If you Itnew that Japanese real income per person In trade was equal to that of citizens of the U5, but twice as high as Canadian real Income which trading equilibrium are we In
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