Home has 1,200 units of labor available. It can produce two goods, apples and bananas.The unit labor requirement in apple production is 3, while in banana production it is 2. Foreign has a labor force of 800. Foreign's unit labor requirement in apple production is 5, while in banana production it is 1. 1. After trade, which price would be possible? 2 or 6?

Home has 1,200 units of labor available. It can produce two goods, apples and bananas.The unit labor requirement in apple production is 3, while in banana production it is 2. Foreign has a labor force of 800. Foreign's unit labor requirement in apple production is 5, while in banana production it is 1. 1. After trade, which price would be possible? 2 or 6?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Home has 1,200 units of labor available. It can
produce two goods, apples and bananas.The
unit labor requirement in apple production is
3, while in banana production it is 2. Foreign
has a labor force of 800. Foreign's unit labor
requirement in apple production is 5, while in
banana production it is 1.
1. After trade, which price would be possible?
2 or 6?
2 Describe the pattern of trade. ?
3 Using the price you have chosen in question
3, show that both Home and Foreign'gain
from trade ?

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