Question

1. Assume the following production capabilities existed for each country using one week worth of labor:

Cars                                     Computers

                              USA                                      1,000                                   500

                              China                                   2,000                                   4,000

1. Draw each production possibilities frontier.
2. Does either country have absolute advantage? Explain.
3. Does either country have comparative advantage? Explain.
4. Show a trade that benefits both countries, if one exists. Explain.

2. Explain, in your own words, the impact of changing our current federal tax code to a proportional tax for personal income from the current progressive tax we have currently. What you feel would be the impact on tax revenue, labor supply, etc. Explain in detail.
3. Find an article published within the last 14 days that relates to our class in some way. Write a short explanation as to how it relates.

Please help me with these three question

Answer 1

(a).

(b).

yes , china has abolute advantage over USA in both the products produced because china can produce both the goods in greater quantity for the same cost , as compared to USA

(c).

yes , China has a comparative advantage of producing computers and USA has comparative advantage of producing cars

China can produce either 2 computers or 1 car with same labour

USA can produce 2 cars or 1 computer with same labour

(d).

China would import cars from USA because USA has comparative cost advantage over China in producing cars.

USA would import computers from China as the latter has a comparative cost advantage over USA

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