Assuming that there are only two countries in the world, Indonesia and ROW (Rest of the World) which both produce Cloth (C) and Food (F) using labor as factor production. The following table shows the number of hours of work needed to produce one unit of C and F in both countries: Cloth (C) Food (F)Indonesia1 hour per meter2 hour per kgROW6 hour per meter3 hour per kg Please answer the followings:a. If we use the Smithian Absolute advantage, can both countries gain? Why?b. Eventually, these countries can still trade, please explainc. Please show the gains from trade for producers and consumers in both countriesd. Can we see a catching up (factor price) pattern for both countries?

Absolute advantage: It refers to the ability of a company, or a country that produces goods and…

Answered: Assuming that there are only two…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Question

Assuming that there are only two countries in the world, Indonesia and ROW (Rest of the World) which both produce Cloth (C) and Food (F) using labor as factor production. The following table shows the number of hours of work needed to produce one unit of C and F in both countries:

	Cloth (C)	Food (F)
Indonesia	1 hour per meter	2 hour per kg
ROW	6 hour per meter	3 hour per kg

Please answer the followings:

a. If we use the Smithian Absolute advantage, can both countries gain? Why?

b. Eventually, these countries can still trade, please explain

c. Please show the gains from trade for producers and consumers in both countries

d. Can we see a catching up (factor price) pattern for both countries?

Definition Video Definition Ability of a country to produce more output with a given level of input or to produce the same level of output with a lower level of input as compared to the other countries. For example, if Country A produces 200 units with the help of 10 units of labor, and Country B produces 300 units with 10 units of labor, Country A has an absolute advantage in the production of the good. Video

Expert Solution