Which good will the northern and southern farms specialize

Assignment Help Other Subject

Reference no: EM132207479

Problem: On the Veritas island, it is illegal to trade with other countries. Only 2 goods are consumed on this island: milk and wheat. The production possibilities frontier in the north takes the form: m = 60 - 6w, while in the south it is: m = 40 - 2w, where m is the amount of milk and w - the amount of wheat. The economy remains in a competitive equilibrium, and 1 unit of wheat is exchanged for 4 units of milk.

a) At the given equilibrium prices, in the production of which good will the northern and southern farms specialize?

b) Friendly Vikings discovered the possibility to trade with Veritas and offered exchange of wheat for milk at a rate: 1 unit of wheat for 3 units of milk. If the Veritas island permits free trade with the Vikings, a new price ratio will appear on the island. How will production (output) of the farmers in the north and in the south change?

c) Specify the interval of exchange rates that may be proposed by the Vikings, under which farmers from the Veritas island will not change their decision regarding the choice of the good that they produce.

Reference no: EM132207479

Questions Cloud

How does the exchange rate system in china impact business : discuss the advantage and disadvantage of the exchange rate systems in place in Australia and China. How does the exchange rate system in China impact

Your current mode of operation and the new option : At what point will you be indifferent between your current mode of operation and the new option?

Construct an asymmetric value function diagram : Construct an asymmetric value function diagram depicting this person's preferences. Construct another diagram depicting a single indifference curve between.

Write a php script that tests an e-mail address is correct : Write a PHP script that tests whether an e-mail address is input correctly.

Which good will the northern and southern farms specialize : On the Veritas island, it is illegal to trade with other countries. Only 2 goods are consumed on this island: milk and wheat.

The aim of performing an audiometry test at matlab : Write a program with the aim of performing an audiometry test at MATLAB. The program should be as interactive as possible.

Did this employee have reasonable expectation of privacy : Did this employee have a reasonable expectation of privacy in the contents of his workplace computer?

How big of a grant would make the project worthwhile : The university is seeking a grants to cover capital cost. How big of a grant would make this project worthwhile (to the university)?

Difference between waste and value added activity : Describe the difference between waste and a value added activity and give examples for different types of organizations.

User Account

All Pages