home cheese alc=1hr/kg wine alw=2hrs/gallonforeign cheese alc*=6hrs/kg wine alw*=3hrs/gallonCalculate the Home country's opportunity cost of producing cheese.In which product does the Home (Foreign* ) country has an absolute advantage?Show in which product does the Home (Foreign* ) country has comparative advantage?Calculate the relative supply (RS)With trade, what is the equilibrium range that the relative price of cheese to wine will settle?Supposing that the intersection of RS and RD occurs at PC /PW = 1, what is the implication?

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Answered: home cheese alc=1hr/kg wine…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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home cheese alc=1hr/kg wine alw=2hrs/gallon

foreign cheese alc*=6hrs/kg wine alw*=3hrs/gallon

Calculate the Home country's opportunity cost of producing cheese.
In which product does the Home (Foreign* ) country has an absolute advantage?
Show in which product does the Home (Foreign* ) country has comparative advantage?
Calculate the relative supply (RS)
With trade, what is the equilibrium range that the relative price of cheese to wine will settle?
Supposing that the intersection of RS and RD occurs at PC /PW = 1, what is the implication?

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