ECN 104 Chapter 3: ECN104 - Chapter 3 and 4

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jadegnat800

24 Oct 2011

School

Ryerson University

Department

Economics

Course

ECN 104

Professor

Tsogbadral Galaabaatar

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Document Summary

Interdependence: one of the ten principles from chapter 1: trade can make everyone better off. , we now learn why people and nations, example. We will look at how much of both goods each country produces and consumes. Canadian consumers get 250 computers and 2500 tons of wheat. Japanese consumers get 120 computers and 600 tons of wheat. We will compare consumption without trade to consumption with trade. First, we need to see how much of each good is produced and traded by the two countries: basic international trade terms, exports: goods produced domestically and sold abroad. To export means to sell domestically produced goods abroad: imports: goods produced abroad and sold domestically. Producing one computer requires 125 labour hours in japan but only 100 in canada. Another measure of cost is the opportunity cost. To answer this, must determine the opportunity cost of a computer in each country. 125 labour hours = 5 tons of wheat)

Related Questions

Germany's Production Possibilities Table

	Production Alternatives
Product	A	B	C	D
Autos	0	40	80	120
Computers	60	40	20	0

Canada's Production Possibilities Table

	Production Alternatives
Product	A'	B'	C'	D'
Autos	0	60	120	180
Computers	120	80	40	0

a.) Since Canada can produce more of either product than Germany can, is there any reason for Canada and Germany to engage in trade? Explain.

b.) If they trade, which country should specialize in which product and why?

c.) If the Germans are consuming and producing 40 autos and 40 computers before the trade and the Canadians are producing and consuming 60 autos and 80 computers before the trade, what are the potential gains from trade (if any) in terms of additional production of autos and computers for both countries combined?

crimsonweasel447

The following are production possibilities tables for Germany andCanada. Note that we are assuming that opportunity costs remainconstant along the production possibilities frontier, and that eachcountry produces only these two products. Use the information inthe tables to answer subsequent questions.

Germany's Production Possibilities Table
Production Alternatives
Product A B C D
Autos 0 40 80 120
Computers 60 40 20 0

Canada's Production Possibilities Table
Production Alternatives
Product A' B' C' Dâ
Autos 0 60 120 180
Computers 120 80 40 0

Since Canada can produce more of either product than Germany can,is there any reason for Canada and Germany to engage in trade?Explain.

If they trade, which country should specialize in which product andwhy?

If the Germans are consuming and producing 40 autos and 40computers before trade and the Canadians are producing andconsuming 60 autos and 80 computers before trade, what are thepotential gains from trade (if any) in terms of additionalproduction of autos and computers for both countriescombined?

jadecrocodile47

You are given the information shown in the table about production relationship in Pugelovia and Pomerania below:

	Labor Hours Per Unit of Rice	Labor Hours Per Unit of Cloth
Pugelovia	75	100
Pomerania	50	50

You make several Ricardian assumptions: these are the only two commodities, the productivity of labor is constant for each product no matter how much is produced, and competition prevails in all markets.

1)Compute the productivity of each country for each product. Which country has an absolute advantage at producing rice? Which country has an absolute advantage at producing cloth?

2)Compute the relative prices of each product in each country without trade. Which country has a comparative advantage at producing rice? Which country has a comparative advantage at producing cloth?

3)According to the theory of comparative advantage, which country would export rice? Which country would export cloth?

4)If Pugelovia and Pomerania are allowed to trade, what would be the limits for the relative price of rice? What would be the limit for the relative price of cloth?

5)Assume that no trade is allowed between the countries and that Pugelovia has 10,000 hours of labor available to use. If people want to consume rice and cloth in equal amounts, how much rice and how much cloth would Pugelovia produce?

6)Plot the production possibility curve for Pugelovia if it has 10,000 hours of labor available. Label the economyâs production of rice and cloth from part e point A on the PPC.

cerisegiraffe33

ECN 104 Chapter 3: ECN104 - Chapter 3 and 4

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