Construct the world relative supply curve

Assignment Help Business Economics

Reference no: EM131424682

Assume there are two countries, Home and Foreign. Home has 1000 labor hours available. It can produce two goods, apples and bananas. The unit labor requirement in apple production is 2, while in banana production is 4. Foreign has 600 labor hours available. Foreign’s unit labor requirement in apple production is 5, while in banana production it is 1.

(a) Construct the world relative supply curve. [Note: on the horizontal axis there is QA+QA*/QB+QB* and on the vertical axis there is PA/PB]

(b) Draw the two possible demand curves and identify the possible equilibria.

(c) Identify the “normal outcome of trade,” state what each country produces in correspondence of the “normal outcome of trade” (including the reason behind your statement).

Reference no: EM131424682

Questions Cloud

What is the opportunity cost of increasing butter production : Draw a production possibilities frontier (PPF) with missiles on the horizontal axis and butter on the vertical axis, illustrating these options, showing points A – F. What is the maximum amount of butter that can be produced, if all resources are dev..

Hat is pattern of trade between these countries as predicted : Television production requires 100 hours of labor and 20 acres of land. Rice, on the other hand, requires 2 hour of labor and 4 acres of land for every pound of rice produced. Home has 200 million labor hours and 400 million acres of land, while Fore..

Which good is labor intensive and land intensive : Suppose that a country produces wine (W) and cheese (C) using its supply of 400 hours of labor (labor hours) and 600 acres of land (acres) (T). To produce a gallon of wine requires 10 hours of labor and 5 acres of land. A pound of cheese requires 4 h..

In order to grow manufacturing jobs : In order to grow manufacturing jobs, suppose the federal government decides to give drivers refund $5,000 when they file their income taxes if they purchase a new car that was made in US. Will this policy affect the demand or supply curve and which w..

Construct the world relative supply curve : Assume there are two countries, Home and Foreign. Home has 1000 labor hours available. It can produce two goods, apples and bananas. The unit labor requirement in apple production is 2, while in banana production is 4. Construct the world relative su..

Which good is labor intensive-which good is land intensive : Suppose that a country produces wine (W) and cheese (C) using its supply of 400 hours of labor (labor hours) and 600 acres of land (acres) (T). To produce a gallon of wine requires 10 hours of labor and 5 acres of land. A pound of cheese requires 4 h..

Change in demand and change in quantity demanded : The distinction between a change in demand and a change in quantity demanded is best made by saying that:

Countries as predicted by the heckscher-ohlin theory : Television production requires 100 hours of labor and 20 acres of land. Rice, on the other hand, requires 2 hour of labor and 4 acres of land for every pound of rice produced. What is the pattern of trade between these countries as predicted by the H..

Purchase of condominium to use as rental property : You are considering the purchase of a condominium to use as a rental property. You estimate that you can rent the condominium for $1200 per month, and the taxes, insurance, and maintenance costs will run about $200 per month. If interest rates are 6%..

User Account

All Pages