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This exercise applies the basic Ricardian model of one factor and two goods. The table below contains the output per hour worked in Foreign and Home for each of two goods. Chocolate Olive Oil Home 9c = 1 pound per hour 90 = 3 gallons per hour * Foreign = 5 pounds per hour 90 = 4 gallons per hour where: = units of chocolate produced in Home by one hour of labor; 90 = units of olive oil produced in Home by one hour of labor; = units of chocolate produced in Foreign by one hour of labor; = units of olive oil produced in Foreign by one hour of labor; do PW = the world price of chocolate (the trade price);

This exercise applies the basic Ricardian model of one factor and two goods. The table below contains the output per hour worked in Foreign and Home for each of two goods. Chocolate Olive Oil Home 9c = 1 pound per hour 90 = 3 gallons per hour * Foreign = 5 pounds per hour 90 = 4 gallons per hour where: = units of chocolate produced in Home by one hour of labor; 90 = units of olive oil produced in Home by one hour of labor; = units of chocolate produced in Foreign by one hour of labor; = units of olive oil produced in Foreign by one hour of labor; do PW = the world price of chocolate (the trade price);

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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This exercise applies the basic Ricardian model of one factor and two goods. The table below contains the output per hour worked in Foreign and Home for each of two goods. Chocolate Olive Oil Home 9c = 1 pound per hour 90 = 3 gallons per hour Foreign = 5 pounds per hour 90 = 4 gallons per hour where: = units of chocolate produced in Home by one hour of labor; = units of olive oil produced in Home by one hour of labor; 90 = units of chocolate produced in Foreign by one hour of labor; = units of olive oil produced in Foreign by one hour of labor; PW = the world price of chocolate (the trade price); po = the world price of olive oil (the trade price). Both Home and Foreign will gain from trade if the world price of chocolate (PW) lies between two limits as follows: gallons > gallons > (Round each response to two decimal places.) pound pound
Transcribed Image Text:This exercise applies the basic Ricardian model of one factor and two goods. The table below contains the output per hour worked in Foreign and Home for each of two goods. Chocolate Olive Oil Home 9c = 1 pound per hour 90 = 3 gallons per hour Foreign = 5 pounds per hour 90 = 4 gallons per hour where: = units of chocolate produced in Home by one hour of labor; = units of olive oil produced in Home by one hour of labor; 90 = units of chocolate produced in Foreign by one hour of labor; = units of olive oil produced in Foreign by one hour of labor; PW = the world price of chocolate (the trade price); po = the world price of olive oil (the trade price). Both Home and Foreign will gain from trade if the world price of chocolate (PW) lies between two limits as follows: gallons > gallons > (Round each response to two decimal places.) pound pound
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