EBK PRINCIPLES OF MACROECONOMICS
12th Edition
ISBN: 9780134079592
Author: Oster
Publisher: YUZU
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Chapter 2, Problem 1.6P
Subpart (a)
To determine
Subpart (b)
To determine
Subpart (c)
To determine
Subpart (d)
To determine
Allocation of workers.
Subpart (e)
To determine
Occurrence of trade.
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Hours Needed to Make 1 Unit of
Sweaters
Cakes
Sweden 1
Iceland
5
4
2
8 units of sweaters and 10 units of cakes
24 units of sweaters and 15 units of cakes
Refer to Table 3-3. Assume that Sweden and Iceland each has 40 labor hours available. If each country divides its
time equally between the production of sweaters and cakes, then total production is
40 units of sweaters and 20 units of cakes
Number of Units Produced in 40 Hours
Sweaters
Cakes
48 units of sweaters and 30 units of cakes
40
8
10
20
Suppose there are two countries Peru and Japan that produces 7,523 units ofFood 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 5,000.
a) On two seperate graphs sketch the initial PFF for the two countries with Food on the x-axis.
b) If Japan and Peru employ half it workers to produce Fuel how much each good can consume? Label this point A and A* respectively.
c) Which country has the absolute advantage in food? In fuel? Explain.
d) Which country has the comparative advantage in food? In fuel? Explain.
e) Which good(s) should each country specialized in?
Production Opportunities
Hours Needed to Make 1 Unit of
Number of Units Produced in 40 Hours
Cheese
Wine
Cheese
Wine
England
1
4
40
10
France
5
2
8
20
Refer to Table 3-3. Assume that England and France each has 40 labor hours available. If each country divides its
time equally between the production of cheese and wine, then total production is
8 units of cheese and 10 units of wine
24 units of cheese and 15 units of wine
40 units of cheese and 20 units of wine
b
48 units of cheese and 30 units of wine
Chapter 2 Solutions
EBK PRINCIPLES OF MACROECONOMICS
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