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?
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?
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter2: Some Tools Of The Economist
Section: Chapter Questions
Problem 7CQ
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Question
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?
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