2. Suriname and Paraguay consume two goods, coffee and machines, and labour is the only input into production. The amount of labour (in hours) required to produce one unit of each good and labour endowments (L) are: Coffee (lbs.) Suriname 15 Paraguay 4 Machines 1200 Let machines be the numerairesso that the price of machines is always one, so you must put coffee on the horizontal axis. a. List each country's good(s) of AA and CA, if any, and relate to each country's autarky (relative) price of coffee. b. If the size of the labour endowment (L) tripled in Paraguay, would your answer to part a. change? Why or why 500 not? For the rest of this question, use the original L. c. Using the PPF diagram, show Paraguay's complete autarky equilibrium and solve for Paraguay's production and consumption of each good if its total consumption of machines in autarky is 100. Be sure to label as many points as you can. d. If the world (or FT) (relative) price of coffee is 4, and Suriname consumes 100 machines in FT, draw Paraguay's complete free-trade (FT) eqm using the PPF diagram. Be sure to calculate (and show) Paraguay's production, consumption, exports and imports (if any) of each good under FT. Check to see that trade is balanced. e. Prove using the appropriate wage information that Suriname gains from trade. f. Use the werld supply of coffee to derive the world PPF. Indicate the correspondence in the two diagrams of all regions and points. Label as many points as you can (endpoints, etc.); show where the FT outcome occurs. g. Explain under what circumstances the FT price of coffee would 5. Which country(ies) would gain from free trade?
2. Suriname and Paraguay consume two goods, coffee and machines, and labour is the only input into production. The amount of labour (in hours) required to produce one unit of each good and labour endowments (L) are: Coffee (lbs.) Suriname 15 Paraguay 4 Machines 1200 Let machines be the numerairesso that the price of machines is always one, so you must put coffee on the horizontal axis. a. List each country's good(s) of AA and CA, if any, and relate to each country's autarky (relative) price of coffee. b. If the size of the labour endowment (L) tripled in Paraguay, would your answer to part a. change? Why or why 500 not? For the rest of this question, use the original L. c. Using the PPF diagram, show Paraguay's complete autarky equilibrium and solve for Paraguay's production and consumption of each good if its total consumption of machines in autarky is 100. Be sure to label as many points as you can. d. If the world (or FT) (relative) price of coffee is 4, and Suriname consumes 100 machines in FT, draw Paraguay's complete free-trade (FT) eqm using the PPF diagram. Be sure to calculate (and show) Paraguay's production, consumption, exports and imports (if any) of each good under FT. Check to see that trade is balanced. e. Prove using the appropriate wage information that Suriname gains from trade. f. Use the werld supply of coffee to derive the world PPF. Indicate the correspondence in the two diagrams of all regions and points. Label as many points as you can (endpoints, etc.); show where the FT outcome occurs. g. Explain under what circumstances the FT price of coffee would 5. Which country(ies) would gain from free trade?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Parts e and f please
Transcribed Image Text:140%
2. Suriname and Paraguay consume two goods, coffee and machines, and labour is the only input into production. The amount
of labour (in hours) required to produce one unit of each good and labour endowments (L) are:
Suriname
Paraguay
Coffee (lbs.)
Machines
15
4
2
L
1200
Let machines be the numeraire¡so that the price of machines is always one, so you must put coffee on the horizontal axis.
a. List each country's good(s) of AA and CA, if any, and relate to each country’s autarky (relative) price of coffee.
b. If the size of the labour endowment (L) tripled in Paraguay, would your answer to part a. change? Why or why
500
not? For the rest of this question, use the original L.
c. Using the PPF diagram, show Paraguay's complete autarky equilibrium and solve for Paraguay's production and
consumption of each good if its total consumption of machines in autarky is 100. Be sure to label as many points as you can.
d. If the world (or FT) (relative) price of coffee is 4, and Suriname consumes 100 machines in FT, draw Paraguay's
complete free-trade (FT) eqm using the PPF diagram. Be sure to calculate (and show) Paraguay's production, consumption,
exports and imports (if any) of each good under FT. Check to see that trade is balanced.
e. Prove using the appropriate wage information that Suriname gains from trade.
f. Use the world supply of coffee to derive the world PP
Indicate the correspondence in the two diagrams of all
regions and points. Label as many points as you can (endpoints, etc.); show where the FT outcome occurs.
g. Explain under what circumstances the FT price of coffee would 5. Which country(ies) would gain from free trade?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education