1. Analyze the following two countries with linear production technologiesand one factor of production. The production technology is given by thefollowing labor requirements:Hot Dogs (labor per unit)Maple Syrup (labor per gallon)USA Canada1321Each country has 600 hours of labor.a. Which country has the absolute advantage in producing hot dogs?Explain.b. What is the opportunity cost of hot dogs in the US? In Canada?c. Which country has a comparative advantage in each good? Explain.d. What is the range of prices for each good under which both countrieswill gain from trade? Explain.e. Suppose that the world price of a unit of hot dogs is 1 gallon of maplesyrup. Draw a large, clear new graph for each country (put hot dogson the X axis) showing the autarky equilibrium and the free tradeequilibrium (including the trade triangle showing the levels ofimports and exports).f. Who gains from free trade in this model? Briefly explain why or whynot.

The following table shows the labor requirements in the production of hot dogs and maple syrup in…

1. Analyze the following two countries with linear production technologies and one factor of production. The production technology is given by the following labor requirements: Hot Dogs (labor per unit) Maple Syrup (labor per gallon) USA Canada 1 3 2 1 Each country has 600 hours of labor. a. Which country has the absolute advantage in producing hot dogs? Explain. b. What is the opportunity cost of hot dogs in the US? In Canada? c. Which country has a comparative advantage in each good? Explain.

1. Analyze the following two countries with linear production technologies and one factor of production. The production technology is given by the following labor requirements: Hot Dogs (labor per unit) Maple Syrup (labor per gallon) USA Canada 1 3 2 1 Each country has 600 hours of labor. a. Which country has the absolute advantage in producing hot dogs? Explain. b. What is the opportunity cost of hot dogs in the US? In Canada? c. Which country has a comparative advantage in each good? Explain.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter3: Interdependence And The Gains Rrom Trade

Section: Chapter Questions

Problem 3PA

See similar textbooks

Similar questions

Review the numbers for Canada and Venezuela from Table 33.12 which describes how many barrels of oil and tons of lumber the workers can produce. Use these numbers to answer the rest of this question. Draw a production possibilities frontier for each country. Assume there are 100 workers in each country. Canadians and Venezuelans desire both oil and lumber. Canadians want at least 2,000 tons of lumber. Mark a point on their production possibilities where they can get at least 3,000 tons. Assume that the Canadians specialize completely because they figured out they have a comparative advantage in lumber. They are willing to give up 1,000 tons of lumber. How much oil should they ask for in return for this lumber to be as well off as they were with no trade? How much should they ask for if they want to gain from trading with Venezuela? Note: We can think of this ask as the relative price or trade price of lumber. Is the Canadian ask you identified in (b) also beneficial for Venezuelans? Use the production possibilities frontier graph for Venezuela to show that Venezuelans can gain from trade.
How does comparative advantage lead to gains from trade?
Brazil can produce 100 pounds of beef or 10 autos. In contrast the United States can produce 40 pounds of beef or 30 autos. Which country has the absolute advantage in beef? Which country has the absolute advantage in producing autos? What is the opportunity cost of producing one pound of beef In Brazil? What is the opportunity cost of producing one pound of beef in the United States?
What is comparative advantage?