6. Refer to the following table. Assume there are two workers in Mexico and three workers in the United States. United Mexico States Bicycle wheels produced per hour Pounds of rice produced per hour 10 a. Determine the pretrade relative price of bicycle wheels in Mexico and the United States. b. Given your answer in part (a), which country has a comparative advantage in the production of rice? c. What is the lowest international relative price of bicycle wheels Mexico is willing to accept in order to engage in trade with the United States? Explain why

6. Refer to the following table. Assume there are two workers in Mexico and three workers in the United States. United Mexico States Bicycle wheels produced per hour Pounds of rice produced per hour 10 a. Determine the pretrade relative price of bicycle wheels in Mexico and the United States. b. Given your answer in part (a), which country has a comparative advantage in the production of rice? c. What is the lowest international relative price of bicycle wheels Mexico is willing to accept in order to engage in trade with the United States? Explain why

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

Question

6. Refer to the following table. Assume there are two workers in Mexico and three workers in
the United States.
United
States
Mexico
Bicycle wheels
produced per hour
Pounds of rice
produced per hour
7
5
10
a. Determine the pretrade relative price of bicycle wheels in Mexico and the United States.
b. Given your answer in part (a), which country has a comparative advantage in the production
of rice?
c. What is the lowest international relative price of bicycle wheels Mexico is willing to accept in
order to engage in trade with the United States? Explain why

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