Below are several questions about the Ricardian Model in the context of Argentina as a small open economy (Argentina takes world prices as given). Some information about Argentina: Argentina can produce two goods: manufactures and beef. The technology to produce manufactures and beef both only use labor and they have constant marginal products of labor. The marginal product of labor in manufactures is 3. The marginal product of labor in beef production is 8. a. In autarky (i.e. no international trade) what is the relative price of beef to manufactures? b. Suppose that Argentina is a "small open economy", that is it takes world prices as given and Argentina will have no impact on international supplies and prices. If the world relative price of beef to manufactures is 1/2, will international trade benefit those in Argentina? If so, what product will Argentina export? What product will it import? c. Suppose that Argentina's labor force equals 100 units. Illustrate the production possibility fron- tier, the point at which Argentina will produce, and given your answer in (2.) the consumption possibility frontier. d. Since the early 2000's incomes in China have risen and in turn their demand for Argentine beef has risen. As a result of China's growth, this increase in demand has pushed up the world relative price of beef to manufactures to 2/3. How has Argentina's consumption possibility frontier changed? How have real wages (in units of manufactures) grown in Argentina?
Below are several questions about the Ricardian Model in the context of Argentina as a small open economy (Argentina takes world prices as given). Some information about Argentina: Argentina can produce two goods: manufactures and beef. The technology to produce manufactures and beef both only use labor and they have constant marginal products of labor. The marginal product of labor in manufactures is 3. The marginal product of labor in beef production is 8. a. In autarky (i.e. no international trade) what is the relative price of beef to manufactures? b. Suppose that Argentina is a "small open economy", that is it takes world prices as given and Argentina will have no impact on international supplies and prices. If the world relative price of beef to manufactures is 1/2, will international trade benefit those in Argentina? If so, what product will Argentina export? What product will it import? c. Suppose that Argentina's labor force equals 100 units. Illustrate the production possibility fron- tier, the point at which Argentina will produce, and given your answer in (2.) the consumption possibility frontier. d. Since the early 2000's incomes in China have risen and in turn their demand for Argentine beef has risen. As a result of China's growth, this increase in demand has pushed up the world relative price of beef to manufactures to 2/3. How has Argentina's consumption possibility frontier changed? How have real wages (in units of manufactures) grown in Argentina?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Please do the work handwritten if you can and include the names of the formulas used and any other rules that need to be followed when solving these problems.
Transcribed Image Text:2. The Ricardian Model and Argentina
Below are several questions about the Ricardian Model in the context of Argentina as a small open
economy (Argentina takes world prices as given). Some information about Argentina: Argentina
can produce two goods: manufactures and beef. The technology to produce manufactures and beef
both only use labor and they have constant marginal products of labor. The marginal product of
labor in manufactures is 3. The marginal product of labor in beef production is 8.
a. In autarky (i.e. no international trade) what is the relative price of beef to manufactures?
b. Suppose that Argentina is a "small open economy", that is it takes world prices as given and
Argentina will have no impact on international supplies and prices. If the world relative price
of beef to manufactures is 1/2, will international trade benefit those in Argentina? If so, what
product will Argentina export? What product will it import?
c. Suppose that Argentina's labor force equals 100 units. Illustrate the production possibility fron-
tier, the point at which Argentina will produce, and given your answer in (2.) the consumption
possibility frontier.
d. Since the early 2000's incomes in China have risen and in turn their demand for Argentine beef
has risen. As a result of China's growth, this increase in demand has pushed up the world
relative price of beef to manufactures to 2/3. How has Argentina's consumption possibility
frontier changed? How have real wages (in units of manufactures) grown in Argentina?
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 4 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education