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    Midterm Cô Thúy Anh

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    Tuấn Nguyên Nguyễn
    The document describes a Ricardian model of comparative advantage between the US and China. It provides labor productivity data for each country in producing shirts and food. The US has an absolute advantage in both goods, but a comparative advantage in food due to lower opportunity costs of production. With free trade, the US will export food and import shirts, increasing total world output. Real wages will rise in both countries as a result of specialization and trade according to comparative advantage.

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    Midterm Cô Thúy Anh

    Uploaded by

    Tuấn Nguyên Nguyễn
    97 views2 pages
    The document describes a Ricardian model of comparative advantage between the US and China. It provides labor productivity data for each country in producing shirts and food. The US has an absolute advantage in both goods, but a comparative advantage in food due to lower opportunity costs of production. With free trade, the US will export food and import shirts, increasing total world output. Real wages will rise in both countries as a result of specialization and trade according to comparative advantage.

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    The document describes a Ricardian model of comparative advantage between the US and China. It provides labor productivity data for each country in producing shirts and food. The US has an absolute advantage in both goods, but a comparative advantage in food due to lower opportunity costs of production. With free trade, the US will export food and import shirts, increasing total world output. Real wages will rise in both countries as a result of specialization and trade according to comparative advantage.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    97 views2 pages

    Midterm Cô Thúy Anh

    Uploaded by

    Tuấn Nguyên Nguyễn
    The document describes a Ricardian model of comparative advantage between the US and China. It provides labor productivity data for each country in producing shirts and food. The US has an absolute advantage in both goods, but a comparative advantage in food due to lower opportunity costs of production. With free trade, the US will export food and import shirts, increasing total world output. Real wages will rise in both countries as a result of specialization and trade according to comparative advantage.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    of 2

    1. Consider a Ricardian model of comparative advantage. There are two countries, the U.S.

    and
    China. Each country can produce two goods, shirts(S) and food (F). Assume the US has 10000
    workers and China has 5000 workers. Labor productivity in each country is:
    Labor Productivity by Country and GoodUnited States
    Shirts 10 shirts/day Food 30 bushels/day

    China
    Shirts 6 shirts/day Food 2 bushels/day

    a)Which country has the absolute advantage in shirts?; in food? Explain.

    b) What is the opportunity cost of producing food in the U.S.?; in China? What is the opportunity
    cost of producing shirts in the U.S.?; in India? Comparative advantage?

    c) )Derive and sketch the production possibility frontier for each country.
    d) Assume that, prior to trade, the U.S. produces 5000 shirts and 15,000 bushels of food, while
    China produces 15000 shirts and 5000 bushels of food. Show how it is possible, by altering
    production in each country, to increase total world output of both goods.

    e) If trade is allowed between the two countries, what will the pattern of trade be (i.e., what good
    will the US export and what good will it import), how does trade affect the real wage in each
    country and what can you conclude about the post-trade relative price of shirts?

    2) Consider a country which can produce two goods: cloth (C) and food (F) using two inputs:
    labor (L) and land (T). Production of each good requires inputs to be used in fixed proportions as
    follows (these are called Leontief technologies):

    To produce cloth (C): 2 units of labor and 4 units of land are required for each unit of C.
    To produce food (F): 4 units of labor and 2 units of capital are required for each unit of F.

    Let L T, represent the total amount of labor and capital available in the economy,

    a) Find the production possibility frontier (ppf) for this economy and sketch it.

    b) Show how an increase in the supply of capital shifts the ppf and the production point where
    inputs are fully used (in this simple version, there is a unique production point that represents full
    employment of both inputs).

    c) Assume two countries (the VN and Malay) have identical tastes and technology, but the VN has
    more land and Malay has more labor. Assuming the relative demand (ratio of demand for cloth to
    demand for manufactures) is independent of income, discuss how autarky goods prices and factor
    prices differ between the two countries, then discuss how trade affect factor prices in each country.
    (graphically)
    3) Cho biểu đồ 2 nước, điền từ vào chỗ trống.

    Tại nước A, production point is... comsumption point is....


    Tại nước B, production point is... comsumption point is....
    Gain của nước A là....
    Gain của nước B là...
    production point is... comsumption point is....

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