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1. Imagine that two countries, Richland and Poorland can produce just two goods, computers and coal. Assume that for a given amount of land and capital, the output of these two products requires the following constant amounts of labour: Richland Poorland1 computer 2 4100 tonnes of coal 4 5 Assume that each country has 20 million workers. (a) Draw the production possibility curves for the two countries (on two separate diagrams). (b) What is the opportunity cost of a computer in (i) Richland; (ii) Poorland? (c) What is the opportunity cost of 100 tonnes of coal in (i) Richland; (ii) Poorland? (d) Which country has a comparative advantage in which product? (e) Assuming that price equals marginal cost, which of the following would represent possible exchange ratios? (i) 1 computer for 40 tonnes of coal; (ii) 2 computers for 140 tonnes of coal; (iii) 1 computer for 100 tonnes of coal; (iv) 1 computer for 60 tonnes of coal; (v) 4 computers for 360 tonnes of coal. (f) Assume that trade now takes place and that 1 computer exchanges for 65 tonnes of coal. Both countries specialise completely in the product in which they have a comparative advantage. How much does each country produce of its respective product? (g) The country producing computers sells 6 million domestically. How many does it export to the other country?(h) How much coal does the other country consume?
#questDuring the 1990s, technological advance reduced the cost of computer chips. Explain, with the use of supply and demand diagrams, how the following markets are affected in ter
What is the development gap? The development gap refers to the divergence between standards of living in the developed and developing world. As like Source World Bank:
It is significant that the contracts between the main contractor and the customer and between the key contractor and subcontractors are back-to-back; what is meant by that term?
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