Economics questions - Assignment Example

College Ricardian model Question one: Opportunity cost for the two countries: Japan Thailand Opportunity cost of rice(Units ofapparel per bushel)2.50.5Opportunity cost of apparel(Bushels of rice per unit0.42The information given suggests that Japan has absolute advantage in the production of apparels and that Thailand has an absolute advantage in the production of rice.Japan also has comparative advantage in the production of apparels and that Thailand has a comparative advantage in the production of rice.

Question two:In no trade equilibrium, Russia produces 1billion barrels of oil and 14billion bushels of wheat and consumes 0.4billion barrels of oil and 20 billion bushels of wheat.Question three:Italy is comparatively more productive in the production of cheese than France. This means that Italy has a lower opportunity cost in the production of cheese as compared to France.Question fourFrance is comparatively more productive in the production of wine than Italy. This means that France has a comparatively low opportunity cost than Italy in the production of wine.

From the analysis of the curves, France exports 4 million bottles of wine and imports 80 million pounds of cheese. From these statistics, Italy and France both gain from the trade since the quantity of products exchanged is almost proportional. Question five:JapanSouth KoreaCar IndustryHDTV IndustryCar IndustryHDTV IndustryAnnual wage(Dollars)336003360021000Marginal products of labor(units per worker)4815Price8400420021000The world price of a car is $16,800 while the world price of HDTV is $4,200.

The real wage in Japan is therefore $67,200 in terms of cars and $33,600 in terms of HDTV. IN South Korea meanwhile, the real wage is $16,800 in terms of cars and $21,000 in terms of HDTV.With trade, the real wage in Japan is lower than in South Korea because Japan has a comparative advantage in the production of cars.When the two countries open international trade, workers in Japan will earn more in the production of cars while workers in South Korea will earn more in the production of HDTVS.

In the international trade equilibrium, Mexico exports 55 million yards of textiles and imports 90 million bushels of corn so Mexico’s terms of trade are prudent.Question six:If ten million hours is moved from baking powder production to coffee production, the output of coffee will increase by 30 million pounds, and the output of baking powder will decrease by 80 million pounds. Therefore, the average opportunity cost will be about 2 of the baking soda, which is the equilibrium between the two points on the PPF.

Possibility APossibility BCoffeeBaking SodaCoffeeBaking SodaLabor employed(millions of hours)15353515Marginal product of labor(pounds per hour)58311Opportunity cost(pound of baking soda per pound of coffee or pound of coffee per pounds of baking soda)1.60.633.670.27The numbers in the table show that as more coffee is produced, the marginal product of labor in coffee production reduces, and the marginal product of labor in baking soda production increases, so the opportunity cost of producing an additional pound of coffee increases.

Bibliography:Zhang, Dingsheng, and Heling Shi. A note on "An inframarginal analysis of the Ricardian Model". Clayton], Vic: Monash University, 2004. Print.