8.(e)(f)Answer ALL parts of this question.Britain and France are countries in a Ricardian trade model. Each country produceswine and bread.Unit labour requirement for wine in Britain, in hours: aw = 12Unit labour requirement for bread in Britain, in hours: aLB = 3Unit labour requirement for wine in France, in hours: aiw = 2Unit labour requirement for bread in France, in hours: aiB = 1Britain and France both have 600 hours of labour available.Qw and QB are the quantities of wine and bread produced in Britain.Qw and Q are the quantities produced in France.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 supplyof wine, giving world relative price on the y-axis asPwРВand world relative quantity on the x-axis asQw + QwQB +QB

e)Output production PPF for each country Britain PPFWhen 0 production of wine then bread…

e and bread. t labour requirement t labour requirement t labour requirement t labour requirement for bread in France, in hours: aiB = 1 ain and France both have 600 hours of labour available. for wine in Britain, in hours: aw = 12 for bread in Britain, in hours: aLB = 3 for wine in France, in hours: aiw = 2 and QB are the quantities of wine and bread produced in Britain. and Q are the quantities produced in France. With wine on the y-axis and bread on the x-axis, draw and label the producti ossibility frontiers for both countries. Label the axes. ow assume there is free trade. On a new diagram, show the world relative s wine, giving world relative price on the y-axis as Pw PB d world relative quantity on the x-axis as Qw + Qw QB+QB

e and bread. t labour requirement t labour requirement t labour requirement t labour requirement for bread in France, in hours: aiB = 1 ain and France both have 600 hours of labour available. for wine in Britain, in hours: aw = 12 for bread in Britain, in hours: aLB = 3 for wine in France, in hours: aiw = 2 and QB are the quantities of wine and bread produced in Britain. and Q are the quantities produced in France. With wine on the y-axis and bread on the x-axis, draw and label the producti ossibility frontiers for both countries. Label the axes. ow assume there is free trade. On a new diagram, show the world relative s wine, giving world relative price on the y-axis as Pw PB d world relative quantity on the x-axis as Qw + Qw QB+QB

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Now, please help me with part g and h. Thank you

(d)
(e)
(f)
(g)
(h)
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
PB
and world relative quantity on the x-axis as
Qw + Qw
QB +QB
Relative world demand is given by:
Dw + Dw
= 6
PB
DB + DB
Pw
where Dw + Dw is world quantity demanded of wine and DB + 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.
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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