home cheese alc=1hr/kg wine alw=2hrs/gallonforeign cheese alc*=6hrs/kg wine alw*=3hrs/gallonCalculate the Home country's opportunity cost of producing cheese.In which product does the Home (Foreign* ) country has an absolute advantage?Show in which product does the Home (Foreign* ) country has comparative advantage?Calculate the relative supply (RS)With trade, what is the equilibrium range that the relative price of cheese to wine will settle?Supposing that the intersection of RS and RD occurs at PC /PW = 1, what is the implication?

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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home cheese alc=1hr/kg wine alw=2hrs/gallon

foreign cheese alc*=6hrs/kg wine alw*=3hrs/gallon

Calculate the Home country's opportunity cost of producing cheese.
In which product does the Home (Foreign* ) country has an absolute advantage?
Show in which product does the Home (Foreign* ) country has comparative advantage?
Calculate the relative supply (RS)
With trade, what is the equilibrium range that the relative price of cheese to wine will settle?
Supposing that the intersection of RS and RD occurs at PC /PW = 1, what is the implication?

Definition Video Definition Ability of a country to produce more output with a given level of input or to produce the same level of output with a lower level of input as compared to the other countries. For example, if Country A produces 200 units with the help of 10 units of labor, and Country B produces 300 units with 10 units of labor, Country A has an absolute advantage in the production of the good. Video

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