Consider a two country, two goods, one factor (labor) model of international trade. Suppose home country require 1 units of labor to produce a unit of cloth and 1 unit of labor to produce a unit of wine (regardless of output levels). Foreign country requires 2 unit of labor to produce 1 unit of cloth and 1.5 units of labor to produce 1 unit of wine (regardless of output levels). (a)  Which country has the comparative advantage in producing wine? Justify your answer. (b)  Which country has the absolute advantage in producing wine? (c)  Which country will have higher autarky price of wine in terms of cloth?

With respect to international trade, specialization means that Multiple Choice each country consumes what it produces. labor is exported or imported in much the same way as other products. most goods and services that are traded internationally are produced in only 1 or 2 nations. labor and other resources in a nation are used to produce the products and services for which they are best suited.

Consider an international trade model consisting of three countries X, Y, and Z. Suppose X uses domestically, sends of its production to Y, and sends of its production to Z. Suppose Y uses domestically, sends of its production to X, and sends of its production to Z. Suppose Z uses sends of its production to X and sends of its production to Y. Assume this is a closed Leontief model. of its production of its production of its domestic goods, If we know country Z produced 124 thousand units of goods, then country X produces country Y produces thousand units of goods. thousand units of goods and

Consider a simplified example of two countries - Singapore and Indonesia - producing two goods – telecommunications equipment and electrical circuit apparatus. Using all its resources, Singapore can produce either 50 telecommunications equipment, or 100 electrical circuit apparatus. Using all its resources, Indonesia can produce either 1,000 telecommunications equipment, or 5,000 circuit apparatus. (a) Which country/countries has/have the absolute advantages and the comparative advantages in the production of telecommunications equipment, and of electrical circuit apparatus? Explain and show. (b) Consider the case of constant opportunity cost. What will be the resulting patterns of trade, terms-of-trade, and the aggregate production and consumption? Provide a diagram to illustrate, with telecommunications equipment on the y-axis. (c) It is found that contrary to the above, there is no complete specialisation in both Singapore and Indonesia. Instead, Singapore partially specialises in…