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Question 3 Assume that there are two countries, Thailand and Vietnam, and two goods, rice and scooters. Unit labor requirements, aLi (for Thailand) and aLi* (for Vietnam) and the labor force, L (in Thailand) and L* (in Vietnam) are given below. (a) ( аLS = 1.00 aLR = 0.20 L = 200 aLS = 0.50 = aLR 0.05 L* = 100 Draw the production possibility frontiers (PPFs) for Thailand and the Vietnam, with scooters on the horizontal axis. Label your graphs carefully. (b) (v Assume that the post-trade relative price of scooters in terms of rice, PsW/PRW, equals 7.5. Set the price of rice equal to one (i.e., choose rice as the numeraire good). Furthermore, assume that each country wishes to consume 100 scooters. Indicate the amounts produced, consumed, exported, imported, and the value of exports and imports for Thailand and Vietnam. Enter your results in a table with columns for each country and rows for the required information. (c) ( ) Verify that trade in this example is feasible (one country's exports are another country's imports) and balanced (value of exports equals value of imports for each country). Question 2 Below are five examples of unit labor requirements for a foreign country (denoted with an asterisk) and a home country. There are two goods: good-1 and good-2. For each example, show which country has the comparative advantage in which good, and which country has the absolute advantage. (a) aL1=0.5 aL2 = 0.2 (b) aL1 = 0.5 aL2 = 0.2 аL1 = 0.2 aL1 = 0.25 (c) aL2 = 0.5 aL2 = 0.1 aL1 = 0.6 aL2 = 0.3 аLI = 0.1 (d) aL2 = 0.3 aL1 = 0.7 aL2 = 0.1 aLI = 0.7 (e) aL2 = 0.07 aL1 = 0.4 aL2 = 0.1 * aL1 = 0.004 aL2 = 0.002

Question 3 Assume that there are two countries, Thailand and Vietnam, and two goods, rice and scooters. Unit labor requirements, aLi (for Thailand) and aLi* (for Vietnam) and the labor force, L (in Thailand) and L* (in Vietnam) are given below. (a) ( аLS = 1.00 aLR = 0.20 L = 200 aLS = 0.50 = aLR 0.05 L* = 100 Draw the production possibility frontiers (PPFs) for Thailand and the Vietnam, with scooters on the horizontal axis. Label your graphs carefully. (b) (v Assume that the post-trade relative price of scooters in terms of rice, PsW/PRW, equals 7.5. Set the price of rice equal to one (i.e., choose rice as the numeraire good). Furthermore, assume that each country wishes to consume 100 scooters. Indicate the amounts produced, consumed, exported, imported, and the value of exports and imports for Thailand and Vietnam. Enter your results in a table with columns for each country and rows for the required information. (c) ( ) Verify that trade in this example is feasible (one country's exports are another country's imports) and balanced (value of exports equals value of imports for each country). Question 2 Below are five examples of unit labor requirements for a foreign country (denoted with an asterisk) and a home country. There are two goods: good-1 and good-2. For each example, show which country has the comparative advantage in which good, and which country has the absolute advantage. (a) aL1=0.5 aL2 = 0.2 (b) aL1 = 0.5 aL2 = 0.2 аL1 = 0.2 aL1 = 0.25 (c) aL2 = 0.5 aL2 = 0.1 aL1 = 0.6 aL2 = 0.3 аLI = 0.1 (d) aL2 = 0.3 aL1 = 0.7 aL2 = 0.1 aLI = 0.7 (e) aL2 = 0.07 aL1 = 0.4 aL2 = 0.1 * aL1 = 0.004 aL2 = 0.002

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter3: Interdependence And The Gains From Trade
Section: Chapter Questions
Problem 5QR
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Question 3 Assume that there are two countries, Thailand and Vietnam, and two goods, rice and scooters. Unit labor requirements, aLi (for Thailand) and aLi* (for Vietnam) and the labor force, L (in Thailand) and L* (in Vietnam) are given below. (a) ( аLS = 1.00 aLR = 0.20 L = 200 aLS = 0.50 = aLR 0.05 L* = 100 Draw the production possibility frontiers (PPFs) for Thailand and the Vietnam, with scooters on the horizontal axis. Label your graphs carefully. (b) (v Assume that the post-trade relative price of scooters in terms of rice, PsW/PRW, equals 7.5. Set the price of rice equal to one (i.e., choose rice as the numeraire good). Furthermore, assume that each country wishes to consume 100 scooters. Indicate the amounts produced, consumed, exported, imported, and the value of exports and imports for Thailand and Vietnam. Enter your results in a table with columns for each country and rows for the required information. (c) ( ) Verify that trade in this example is feasible (one country's exports are another country's imports) and balanced (value of exports equals value of imports for each country).
Transcribed Image Text:Question 3 Assume that there are two countries, Thailand and Vietnam, and two goods, rice and scooters. Unit labor requirements, aLi (for Thailand) and aLi* (for Vietnam) and the labor force, L (in Thailand) and L* (in Vietnam) are given below. (a) ( аLS = 1.00 aLR = 0.20 L = 200 aLS = 0.50 = aLR 0.05 L* = 100 Draw the production possibility frontiers (PPFs) for Thailand and the Vietnam, with scooters on the horizontal axis. Label your graphs carefully. (b) (v Assume that the post-trade relative price of scooters in terms of rice, PsW/PRW, equals 7.5. Set the price of rice equal to one (i.e., choose rice as the numeraire good). Furthermore, assume that each country wishes to consume 100 scooters. Indicate the amounts produced, consumed, exported, imported, and the value of exports and imports for Thailand and Vietnam. Enter your results in a table with columns for each country and rows for the required information. (c) ( ) Verify that trade in this example is feasible (one country's exports are another country's imports) and balanced (value of exports equals value of imports for each country).
Question 2 Below are five examples of unit labor requirements for a foreign country (denoted with an asterisk) and a home country. There are two goods: good-1 and good-2. For each example, show which country has the comparative advantage in which good, and which country has the absolute advantage. (a) aL1=0.5 aL2 = 0.2 (b) aL1 = 0.5 aL2 = 0.2 аL1 = 0.2 aL1 = 0.25 (c) aL2 = 0.5 aL2 = 0.1 aL1 = 0.6 aL2 = 0.3 аLI = 0.1 (d) aL2 = 0.3 aL1 = 0.7 aL2 = 0.1 aLI = 0.7 (e) aL2 = 0.07 aL1 = 0.4 aL2 = 0.1 * aL1 = 0.004 aL2 = 0.002
Transcribed Image Text:Question 2 Below are five examples of unit labor requirements for a foreign country (denoted with an asterisk) and a home country. There are two goods: good-1 and good-2. For each example, show which country has the comparative advantage in which good, and which country has the absolute advantage. (a) aL1=0.5 aL2 = 0.2 (b) aL1 = 0.5 aL2 = 0.2 аL1 = 0.2 aL1 = 0.25 (c) aL2 = 0.5 aL2 = 0.1 aL1 = 0.6 aL2 = 0.3 аLI = 0.1 (d) aL2 = 0.3 aL1 = 0.7 aL2 = 0.1 aLI = 0.7 (e) aL2 = 0.07 aL1 = 0.4 aL2 = 0.1 * aL1 = 0.004 aL2 = 0.002
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