(a) (b) (c) (d) (e) (f) Answer ALL parts of this question. Britain and France are countries in a Ricardian trade model. Each country produces wine and bread. Unit labour requirement for wine in Britain, in hours: a Unit labour requirement for bread in Britain, in hours: a Unit labour requirement for wine in France, in hours: a Unit labour requirement for bread in France, in hours: a Britain and France both have 600 hours of labour available. Qw and Qs are the quantities of wine and bread produced in Britain. Qw and Q are the quantities produced in France. Explain what is meant by the "unit labour requirement in hours". Calculate labour productivity, in terms of units produced per hour, for each good in each country. Explain which country has the comparative advantage in wine production, and why. Under autarky, calculate the relative price of wine in each country. With wine on the y-axis and bread on the x-axis, draw and label the production possibility frontiers for both countries. Label the axes. Now assume there is free trade. On a new diagram, show the world relative supply of wine, giving world relative price on the y-axis as Pw Ps and world relative quantity on the x-axis as Qw + Qw lo + Q = 12 = 3 = 2 = 1 Relative world demand is given by: Ps Pw Dw + Dw Ds + D where Dw + D is world quantity demanded of wine and Ds + D is world quantity demanded of bread. Use the given equation to draw the relative demand curve and give the equilibrium relative price under free trade. = 6- (h) Redraw the production possibility frontier diagram for France, but now show the frontier both under autarky and after trade. Under the assumption that consumers in France want the same mix of both goods as the rest of the world, use the diagram to illustrate the gains from trade. Explain in words why a country that is more efficient in producing both goods can still gain from trade.
(a) (b) (c) (d) (e) (f) Answer ALL parts of this question. Britain and France are countries in a Ricardian trade model. Each country produces wine and bread. Unit labour requirement for wine in Britain, in hours: a Unit labour requirement for bread in Britain, in hours: a Unit labour requirement for wine in France, in hours: a Unit labour requirement for bread in France, in hours: a Britain and France both have 600 hours of labour available. Qw and Qs are the quantities of wine and bread produced in Britain. Qw and Q are the quantities produced in France. Explain what is meant by the "unit labour requirement in hours". Calculate labour productivity, in terms of units produced per hour, for each good in each country. Explain which country has the comparative advantage in wine production, and why. Under autarky, calculate the relative price of wine in each country. With wine on the y-axis and bread on the x-axis, draw and label the production possibility frontiers for both countries. Label the axes. Now assume there is free trade. On a new diagram, show the world relative supply of wine, giving world relative price on the y-axis as Pw Ps and world relative quantity on the x-axis as Qw + Qw lo + Q = 12 = 3 = 2 = 1 Relative world demand is given by: Ps Pw Dw + Dw Ds + D where Dw + D is world quantity demanded of wine and Ds + D is world quantity demanded of bread. Use the given equation to draw the relative demand curve and give the equilibrium relative price under free trade. = 6- (h) Redraw the production possibility frontier diagram for France, but now show the frontier both under autarky and after trade. Under the assumption that consumers in France want the same mix of both goods as the rest of the world, use the diagram to illustrate the gains from trade. Explain in words why a country that is more efficient in producing both goods can still gain from trade.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question 8 g and h
Hello can you please help me solve this question 8 g and h thank you
Transcribed Image Text:8.
Answer ALL parts of this question.
Britain and France are countries in a Ricardian trade model. Each country produces
wine and bread.
Unit labour requirement for wine in Britain, in hours: azw = 12
Unit labour requirement for bread in Britain, in hours: a = 3
Unit labour requirement for wine in France, in hours: atw = 2
Unit labour requirement for bread in France, in hours: a = 1
Britain and France both have 600 hours of labour available.
Qw and Qs are the quantities of wine and bread produced in Britain.
Qw and Q are the quantities produced in France.
Explain what is meant by the "unit labour requirement in hours".
(b)
Calculate labour productivity, in terms of units produced per hour, for each good in
each country.
(c)
Explain which country has the comparative advantage in wine production, and why.
(d)
Under autarky, calculate the relative price of wine in each country.
(e)
With wine on the y-axis and bread on the x-axis, draw and label the production
possibility frontiers for both countries. Label the axes.
(f)
Now assume there is free trade. On a new diagram, show the world relative supply
of wine, giving world relative price on the y-axis as
Pw
PB
and world relative quantity on the x-axis as
Qw + Qw
Qs + Q
Relative world demand is given by:
Pa
Dw + Dw
Ds + D
= 6-
Pw
where Dw + D is world quantity demanded of wine and D; + D is world quantity
demanded of bread. Use the given equation to draw the relative demand curve and
give the equilibrium relative price under free trade.
(h) Redraw the production possibility frontier diagram for France, but now show the
frontier both under autarky and after trade. Under the assumption that consumers in
France want the same mix of both goods as the rest of the world, use the diagram to
illustrate the gains from trade. Explain in words why a country that is more efficient
in producing both goods can still gain from trade.
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