Suppose there are two countries Peru and Japan that produce Food and Fuel. Peru can produce 7,523 units of Food or 17,853 units of Fuel using a labour force of 8000. Japan can produce 5,733 units of Food or 24,156 units of Fuel using a labour force of 5000.
Suppose there are two countries Peru and Japan that produce Food and Fuel. Peru can produce 7,523 units of Food or 17,853 units of Fuel using a labour force of 8000. Japan can produce 5,733 units of Food or 24,156 units of Fuel using a labour force of 5000.
Chapter18: International Trade And Comparative Advantage
Section: Chapter Questions
Problem 2TY
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Transcribed Image Text:Suppose there are two countries Peru and Japan that
produce Food and Fuel. Peru can produce 7,523 units of
Food or 17,853 units of Fuel using a labour force of 8000.
Japan can produce 5,733 units of Food or 24,156 units of
Fuel using a labour force of 5000.
Transcribed Image Text:*(g) If the terms of trade is 2 to 1 in favour of the country
with the comparative advantage in food. Determine the
combination of the two goods that each country will
consume after trade if the country with the comparative
advantage in fuel imports 4000 units of food. Label this
point B and B* respectively.
*h) Who gains from trade? Who loses? What is the impact
if any on the world?
*(i) What should the terms of trade be to make trade
beneficial for BOTH Japan and Peru? Explain.
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