Consider two countries Home and Foreign producing goods using only one factor of production, Labor. These are the marginal products of labor. Home has 100 people and foreign has 50 people. Home: Wheat 4 bushels Cloths 2 yards Foreign: Wheat 1 bushel Cloths 1 yard Assuming there is no trade, draw production possibility frontiers of two countries. With no trade, what are the relative prices of wheat and cloths in two countries? What will happen when they begin to trade?
Consider two countries Home and Foreign producing goods using only one factor of production, Labor. These are the marginal products of labor. Home has 100 people and foreign has 50 people. Home: Wheat 4 bushels Cloths 2 yards Foreign: Wheat 1 bushel Cloths 1 yard Assuming there is no trade, draw production possibility frontiers of two countries. With no trade, what are the relative prices of wheat and cloths in two countries? What will happen when they begin to trade?
Chapter1: Making Economics Decisions
Section: Chapter Questions
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- Consider two countries Home and Foreign producing goods using only one factor of production, Labor. These are the marginal products of labor. Home has 100 people and foreign has 50 people.
Home: Wheat 4 bushels
Cloths 2 yards
Foreign: Wheat 1 bushel
Cloths 1 yard
- Assuming there is no trade, draw
production possibility frontiers of two countries. - With no trade, what are the relative
prices of wheat and cloths in two countries? - What will happen when they begin to trade?
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