The Ricardian Model of Trade 1. In class there was a clicker question building o

Question

The Ricardian Model of Trade 1. In class there was a clicker question building on the trade example that we used to work through the Ricardian Model that asked you to figure out what would be the value of imports and exports for the United States and the Dominican Republic if the U.S. traded QG-120 to the Dominican Republic (assuming PB/PG 3G/1B). Draw the PPF diagrams for both countries labeling numerically the production points and consumption points after this trade is completed. Please also indicate numerically where the exports and imports are for each country on your graphs. Consider the following information on two countries that use only labor to produce apples (A) and bananas (B): 2. Apples (auA) Bananas (aib) Labor (# of workers) U.S. (Home) 3 workers/apple 2 workers/banana 1,200 Costa Rica (Foreign) 5 workers/apple 1 workers/banana 800 a) b) Describe which country has the absolute advantage in the production of each good c) Graph both countries production possibilities frontiers (PPF's) putting Apples on the x-axis and whv. What is the opportunity cost of producing each good in both countries. Use this answer to explain which country has the comparative advantage in the productiorn of each good. In the no-trade (or pre-trade) economy, what must be the equilibrium relative price of apples (in terms of bananas), Pa/PB , for both goods to be produced? Explain briefly. Suppose the world relative price of apples is Pa/PB 2B/A. Show the gains from trade on the U.S. PFF that are possible given this world price (you need not show the graph for Costa Rica) d) e) f) Suppose the U.S. doubles the number of its workers, but they become half as productive. How does this change your above analysis? Does this matter to the U.S? Explain briefly.

Explanation / Answer

Ans

Question one can't be answered without information provided in clicker question Anyway I have to answer only 1 question as per Chegg guidelines.

F Above analysis will not change but it matters for usa because per capita output and thus welfare will fall. Each worker now gets less to consume and save.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.