This exercise applies the basic Ricardian model of one factor and two goods. The table below contains the unt labor requirements in Foreign and Home for each of two goods
This exercise applies the basic Ricardian model of one factor and two goods. The table below contains the unt labor requirements in Foreign and Home for each of two goods
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:This exercise applies the basic Ricardian model of one factor and two goods. The tablo below contains the unit labor requirements in Foreign and Home for each of two goods
Whiskey
Candy
Lc1 hour per pound
Home
w3 hours per galon.
Foreign
a5 hours per pound
w4 hours per galon
where
Acnumber of labor hours needed to produce a unit of candy in Home
aw number of labor hours needed to produce a unit of whiskey in Home,
= number of labor hours needed to produce a unit of candy in Foreign
rumber of labor hours needed to produce a unit of whskey in Foreign
Po the money price per pound of candy. Pw the money price per pound of whiskey
in the absence of trade between Home and Foreign the unt labor requirements given above indicate that the relative price of candy (PPwill be lower in Home
Once Home and Foreign engage in trade, the world equilonum relative price of candy (PPw) wil be determined by the
In the graphical portrayal of world equilibrium, the relative demand curve of candy is dowward-sloping and the relative supply curve of candy is shaped as
OB. a vertical line.
OA a dowrward-sioping curve
OD. an upward-sloping curve
Oc. astep function
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education