Suppose that Japan and Indonesia have unit labor requirements for producing one tonne of steel and one tonne of oil shown in the following table: Steel Oil Unit Labour Requirements Japan 4 2 Indonesia 4 5 a) Determine which country has a comparative advantage in each good. b) If Japan and Indonesia each have 100 units of labour, calculate the maximum production of each good that both of the countries can produce. c) Before trade, Indonesia allocates 1/5 of its total units of labour to produce steel and the rest to produce oil while Japan allocates 3/5 of its total units of labour to produce steel and the rest to produce oil calculate how many tonnes of steel and oil can be produced by both of the countries.
Suppose that Japan and Indonesia have unit labor requirements for producing one tonne of steel and one tonne of oil shown in the following table: Steel Oil Unit Labour Requirements Japan 4 2 Indonesia 4 5 a) Determine which country has a comparative advantage in each good. b) If Japan and Indonesia each have 100 units of labour, calculate the maximum production of each good that both of the countries can produce. c) Before trade, Indonesia allocates 1/5 of its total units of labour to produce steel and the rest to produce oil while Japan allocates 3/5 of its total units of labour to produce steel and the rest to produce oil calculate how many tonnes of steel and oil can be produced by both of the countries.
Chapter3: International Financial Markets
Section: Chapter Questions
Problem 3IEE
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![Suppose that Japan and Indonesia have unit labor requirements for producing one
tonne of steel and one tonne of oil shown in the following table:
Steel
Oil
Unit Labour Requirements
Japan
4
2
Indonesia
4
5
a) Determine which country has a comparative advantage in each good.
b) If Japan and Indonesia each have 100 units of labour, calculate the maximum
production of each good that both of the countries can produce.
c) Before trade, Indonesia allocates 1/5 of its total units of labour to produce steel
and the rest to produce oil while Japan allocates 3/5 of its total units of labour to
produce steel and the rest to produce oil calculate how many tonnes of steel and
oil can be produced by both of the countries.
d) Both of the countries agree that 1 tonne of steel can be exchanged for 1 tonne
of oil. Calculate the net gains after trade is allowed if Japan consumes 30 tonnes
of oil domestical.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F695487a0-2787-4c84-ac17-ee1e70558ace%2F1d808ea0-5b0e-471f-af37-ab60e1cd0942%2Fw3opev_processed.png&w=3840&q=75)
Transcribed Image Text:Suppose that Japan and Indonesia have unit labor requirements for producing one
tonne of steel and one tonne of oil shown in the following table:
Steel
Oil
Unit Labour Requirements
Japan
4
2
Indonesia
4
5
a) Determine which country has a comparative advantage in each good.
b) If Japan and Indonesia each have 100 units of labour, calculate the maximum
production of each good that both of the countries can produce.
c) Before trade, Indonesia allocates 1/5 of its total units of labour to produce steel
and the rest to produce oil while Japan allocates 3/5 of its total units of labour to
produce steel and the rest to produce oil calculate how many tonnes of steel and
oil can be produced by both of the countries.
d) Both of the countries agree that 1 tonne of steel can be exchanged for 1 tonne
of oil. Calculate the net gains after trade is allowed if Japan consumes 30 tonnes
of oil domestical.
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