Given the input-output relationships in the table below:
Countries
A B
Goods
X 8 4
Y 4 1
(a) Which country has absolute advantage in which good and why?
(b) Which country has comparative advantage in which good and why?
(c) If A is endowed with 8000 hours of labor, how much X will it produce after trade begins? How much Y? Explain.
(d) What is the allowable range on A's wages relative to B's if trade is flowing between these two countries according to comparative advantage?
(a) B (A) has absolute advantage in both (neither).
(b) A (B) has comparative advantage in X (Y).
(c) 1000 units of X; 0 units of Y (i.e. complete specialization)
(d) A's wage must range between 1/4 and 1/2 B's wage.
You might also like to view...
Ed Sike was able to increase his net revenue by charging different prices to different customers because
A) his cost of serving different customers varied. B) his marginal costs declined as his sales increased. C) his marginal costs were rising. D) he could distinguish faculty from students at low cost.
The first piece of antitrust legislation in the United States to deal with price discrimination was the
a. Clayton Act b. FTC Act c. Cellar-Kefauver Act d. Robinson-Patman Act e. Sherman Antitrust Act
The AFL was formed to promote
a. social equality b. business profits c. environmental causes d. strictly economic goals e. political changes
The prospect of future deficits:
A. encourages government to conduct expansionary fiscal policy. B. would prompt government to vastly expand discretionary spending. C. requires a government to eliminate all entitlement spending. D. limits the ability of government to conduct fiscal policy in the near future.