Suppose Home and Foreign countries (H and F) trade two goods, G1 and G2, and eachcountry is populated with 2 workers (workers can split work time between two industries).At home, one worker can produce either 1 units of G1 or 2 units of G2 in one day. Forforeign worker takes 0.5 days to produce one unit of G1 and 0.2 days to produce one unitof G2.(a)Calculate the opportunity costs of producing G1 in each country.(b) Draw a diagram which shows Home country equilibrium with and without trade(production, consumption, relative price, and trade flows). Illustrate gains from trade in thisdiagram.(c) Calculate real wage in the Home country before and after trade if free traderelative price of G1 is 2.5.(d) Calculate the world relative supply of G1 at the relative price 2 = 2.2

Country of origin (H)Opportunity cost: The cost of failing to produce the next best…

Suppose Home and Foreign countries (H and F) trade two goods, G1 and G2, and each country is populated with 2 workers (workers can split work time between two industries). At home, one worker can produce either 1 units of G1 or 2 units of G2 in one day. For foreign worker it takes 0.5 days to produce one unit of G1 and 0.2 days to produce one unit of G2. (a) Calculate the opportunity costs of producing G1 in each country.

Suppose Home and Foreign countries (H and F) trade two goods, G1 and G2, and each country is populated with 2 workers (workers can split work time between two industries). At home, one worker can produce either 1 units of G1 or 2 units of G2 in one day. For foreign worker it takes 0.5 days to produce one unit of G1 and 0.2 days to produce one unit of G2. (a) Calculate the opportunity costs of producing G1 in each country.

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter2: Production Possibilities Frontier Framework

Section: Chapter Questions

Problem 6QP

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