Draw the production possibility frontier of each country

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Reference no: EM131060339

Consider the following table about the technology of producing cars and TVs, where labor is the only factor of production:


1 Car 1 TV
Country 1 20 labor 5 labor
Country 2 50 labor 25 labor

(a) Country 1 has a comparative advantage in :

(b) Country 2 has a comparative advantage in :

(c) Assume that each country has 1000 workers, draw the production possibility frontier of each country?

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(d) The trade price:

(e) Assume that the autarky production is when both countries devote half of their labor to produce each good. Now, suppose that country 1 devotes 40% of their labor to produce cars and 60% to produce TVs, while country 2 devotes 75% of their labor to produce cars and 25% to produce TVs, and then they decide to trade such that the number of cars available for consumption in both countries after trade is the same as in autarky. Complete the following table:

 

Country 1

Country 2

 

Cars

TVs

Cars

TVs

Autarky

 

 

 

 

Production & Consumption

 

 

 

 

Trade

 

 

 

 

Production

 

 

 

 

Trade

 

 

 

 

Consumption

 

 

 

 

Gains from Trade

 

 

 

 

Reference no: EM131060339

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