Question

Two countries, Alia and Palia are closed to international trade. Alia has 1800 units of labor...

Two countries, Alia and Palia are closed to international trade. Alia has 1800 units of labor available, and Palia has 900 units. Both countries can produce two goods, skis and snowboards. Alia’s unit labor requirement in skis production is 3, while in snowboards production is 2. Palia’s unit labor requirement in skis production is 5, while in snowboards production it is 1.

a) Graph Alia and Palia’s production possibility frontier.

b) Compute Alia and Palia’s opportunity cost of skis in terms of snowboards. Explain.

c) In the absence of trade, compute the price of skis in terms of snowboards in Alia and in Palia. Assume that consumers in each country like to consume both goods. Explain.

d) Assume now that the two countries open to trade with each other. Which country has comparative advantage in skis? And in snowboards? Explain.

e) Construct the world relative supply curve. Show it in a graph.

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Two countries, Alia and Palia are closed to international trade. Alia has 1800 units of labor...
Two countries, Alia and Palia are closed to international trade. Alia has 1800 units of labor available, and Palia has 900 units. Both countries can produce two goods, skis and snowboards. Alia’s unit labor requirement in skis production is 3, while in snowboards production is 2. Palia’s unit labor requirement in skis production is 5, while in snowboards production it is 1. a) Graph Alia and Palia’s production possibility frontier. b) Compute Alia and Palia’s opportunity cost of skis in...
Problem 3 (Ricardian Model): Two countries, Alia and Palia are closed to international trade. Alia has...
Problem 3 (Ricardian Model): Two countries, Alia and Palia are closed to international trade. Alia has 1800 units of labor available, and Palia has 900 units. Both countries can produce two goods, skis and snowboards. Alia’s unit labor requirement in skis production is 3, while in snowboards production is 2. Palia’s unit labor requirement in skis production is 5, while in snowboards production it is 1. a) Graph Alia and Palia’s production possibility frontier. b) Compute Alia and Palia’s opportunity...
Suppose there are two countries, USA and Japan. USA is regarded as the home country and...
Suppose there are two countries, USA and Japan. USA is regarded as the home country and Japan is the foreign country. USA has 100 units of labor available and Japan has 80 units of labor. Both countries can produce only two goods, airplanes and cars. The output per hour of labor in the production of airplanes in the USA is 12, while in car production the output per hour of labor is 6. In Japan, the output per hour of...
[One-factor model] Assume that there are 2 countries: Home and Foreign. And there are 2 goods:...
[One-factor model] Assume that there are 2 countries: Home and Foreign. And there are 2 goods: apple and banana. Home has 2,400 units of labor available. The unit labor requirement in apple production is 6, while in banana production it is 4. Foreign has 800 units of labor available. The unit labor requirement in apple production is 5, while in banana production it is 1. 1) What is the opportunity cost of apples in terms of bananas in Home and...
Consider the following model of trade between Home and Foreign. Assume throughout that those two countries...
Consider the following model of trade between Home and Foreign. Assume throughout that those two countries are the only two countries in the world, at least for purposes of trade. There are two goods: Corn and Radio. Consumers always spend one-third of their income on Corn and the remainder on Radios. The only factor of production is labour. Each home country worker can produce 2 units of Corn or 3 units of Radios per unit of time, while each foreign...
Suppose there are two countries, USA and Japan. USA is regarded as the home country and...
Suppose there are two countries, USA and Japan. USA is regarded as the home country and Japan is the foreign country. USA has 100 units of labor available and Japan has 80 units of labor. Both countries can produce only two goods, airplanes and cars. The output per hour of labor in the production of airplanes in the USA is 12, while in car production the output per hour of labor is 6. In Japan, the output per hour of...
In a two-good Ricardian economy, the Home country has 100 units of labor with labor productivity...
In a two-good Ricardian economy, the Home country has 100 units of labor with labor productivity equal to 2 (i.e., each worker can produce 2 units of each good) and the Foreign has 200 units of labor with labor productivity equal to 1 (i.e., each worker can produce 1 unit of each good). Which of the following statements is necessarily true? Home is labor-abundant. Foreign is labor-abundant. Home and Foreign have the same production possibility frontier (PPF). Home's PPF is...
Suppose there are two countries Thailand and Vietnam. Both countries produce banana and textile from two...
Suppose there are two countries Thailand and Vietnam. Both countries produce banana and textile from two factor inputs, labor and land. While Thailand is land-abundant, Vietnam is labor-abundant. Finally, both countries are identical in consumer's preferences (i.e., consumers always choose the equal quantity of the two goods, for example) and production techniques (i.e., production technique for banana is land-intensive and that for textile is labor-intensive). 1. Consider the production possibility frontiers for the two countries that are appropriate to the...
The world economy consists of two regions, North and South, and two goods, manufacturing (good 1)...
The world economy consists of two regions, North and South, and two goods, manufacturing (good 1) and agriculture (good 2). In North, producing one unit of manufacturing good requires two units of labor while producing one unit of agricultural good requires one unit of labor. In South, producing one unit of manufacturing good requires five units of labor while producing one unit of agricultural good requires one unit of labor. North has 100 units of labor and South has 150...
In order to conjecture the circumstances in these two countries under autarky (when there is no...
In order to conjecture the circumstances in these two countries under autarky (when there is no trade), consider the following hypothetical scenario based on Ricardian model. Assume throughout that those two countries (Italy and Sweden) are the only two countries in the world, at least for purposes of trade. There are two goods: shoes and calculators. Consumers in both countries always spend half of their income on shoes and half of their income on calculators. The only factor of production...