3 District 12 has 2 units of labor and District 8 has 1 unit of labor. The MPL of textilesin District 12 is 5 and in District 8 is 8 units of textiles per unit of labor. The correspondingMPLs of coal are 3 and 6. Further, assume that in no trade equilibrium each districtconsumes 1/2 of its output of coal. 1. Calculate the opportunity cost of Coal in both districts.2. Draw export supply and import demand for Coal. Make sure to label the axes, mark allthe relevant numbers on the vertical and horizontal axes, clearly state which country isthe exporter and which is the importer.3. Real wage in each country can be expressed in terms of Coal or Textiles. What willhappen to real wage in District 8 in terms of Coal and Textiles when the two countriestrade with complete specialization?

Ricardo postulated about the types of goods and services that countries should produce, and he…

District 12 has 2 units of labor and District 8 has 1 unit of labor. The MPL of textiles in District 12 is 5 and in District 8 is 8 units of textiles per unit of labor. The corresponding MPLs of coal are 3 and 6. Further, assume that in no trade equilibrium each district consumes 1/2 of its output of coal.

District 12 has 2 units of labor and District 8 has 1 unit of labor. The MPL of textiles in District 12 is 5 and in District 8 is 8 units of textiles per unit of labor. The corresponding MPLs of coal are 3 and 6. Further, assume that in no trade equilibrium each district consumes 1/2 of its output of coal.

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter9: Application: International Trade

Section: Chapter Questions

Problem 8PA

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