Trade theories suggest that both countries gain from trade. In a 2-country, 2-good model, we assume the 2 states—Futland and Tandam share a common currency (allowing us to ignore exchange rate), they both have the same wages, and they both produce two goods: bicycles and boots. The units of labour requirement are shown below, assuming constant returns to scale. Production Techniques: Units of labour hour required per unit output Tandom Futland Bicycles 90 hours 120 hours Boots 30 hours 50 hours i. Briefly explain absolute advantage theory by Adam Smith and comparative advantage theory by David Ricardo. Which country has an absolute advantage in the production of each good?

Trade theories suggest that both countries gain from trade. In a 2-country, 2-good model, we assume the 2 states—Futland and Tandam share a common currency (allowing us to ignore exchange rate), they both have the same wages, and they both produce two goods: bicycles and boots. The units of labour requirement are shown below, assuming constant returns to scale. Production Techniques: Units of labour hour required per unit output Tandom Futland Bicycles 90 hours 120 hours Boots 30 hours 50 hours i. Briefly explain absolute advantage theory by Adam Smith and comparative advantage theory by David Ricardo. Which country has an absolute advantage in the production of each good?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter6: Managing In The Global Economy

Section: Chapter Questions

Problem 8E

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Trade theories suggest that both countries gain from trade. In a 2-country, 2-good model, we assume the 2 states—Futland and Tandam share a common currency (allowing us to ignore exchange rate), they both have the same wages, and they both produce two goods: bicycles and boots. The units of labour requirement are shown below, assuming constant returns to scale. Production Techniques: Units of labour hour required per unit output Tandom Futland Bicycles 90 hours 120 hours Boots 30 hours 50 hours Define opportunity cost. Using the table above, calculate the opportunity cost of bicycles in terms of boots and the opportunity cost of boots in terms of bicycles for each of the countries.
Standard trade Model When comparing the agricultural sectors of the USA and the UK, we can analyze it within the framework of the standard trade model, also known as the neoclassical trade model. This model assumes perfect competition, constant returns to scale, and comparative advantage based on differences in factor endowments. Here's how the standard model can be applied to the agricultural sectors of the USA and the UK: a) Land: The USA has vast amounts of arable land, which can be used for agriculture. Its large land endowment can give it a comparative advantage in the production of various agricultural commodities. b) Labor: The UK's agricultural sector might not have a significant comparative advantage in labor-intensive agriculture due to relatively high labor costs compared to countries with lower wage levels. However, it may focus on niche agricultural products or high-value crops that require specialized labor or have specific geographical advantages. c) Capital: The…
In the Heckscher-Ohlin-Vanek model, labour productivities in the production of a good in the different countries must be equal to each other must be equal to productivity of capital in producing the same good must be equal to each other and the capital productivities for the same good in different countries none of the above.
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Suppose country A and B have a labour force of 1 and produce hops and barley using only labour. Country A's unit labour cost are 0.5 for hops and 0.5 for barley, country B's 0.2 for hops and 0.4 for barley. Suppose that both are needed to brew beer in equal quantitiy, so that both national and international demand has the property that equal amounts of barley and hops are demanded. How much more beer (as a percentage) will be brewed under international trade than in autarky? Please enter the percentage rounded to a whole number (up or down is both acceptable) without the percentage sign.
The gravity model of trade describes an exact physical relationship between trade, distance and size of trading partners. True False
Explain the basic premise of the gravity model of trade and why it is commonly used to model trade relationships between countries.
"Accoring to Ricardo's analysis, a country exports any good whose production requires fewer labor hours per unit than the labor hours per unit needed to produce the good in the foreign country. That is, the country exports any good in which its labor producivity is higher than the labor productivity for this good in the foreign country." Do you agree or disagree? why?
please I need solutions to the questions
What is the viewpoint of Ricardo regarding the Comparative Difference in Costs?
Consider an H-O economy in which there are two countries (US and France), two goods (wine and cheese) and two factors (capital and labor). In each question below you are given partial information about the model and asked to infer some other part. Treat each question separately and independently. a. Assume the US is labor-abundant and cheese is labor-intensive. What is the pattern of trade in free trade? (State what the US and France import and export). Which theorem is applied to get this answer? Explain. b. Suppose an increase in the labor force in the US causes cheese production to increase. Which factor is used intensively in wine production? Which H-O theorem is applied to get this answer? Explain. c. Suppose a decrease in the price of cheese causes a decrease in the wage rate in the US economy. Which factor is used intensively in cheese production in France? Which H-O theorem is used to get this answer? Explain. d. Suppose France exports wine, the capital-intensive good. Which…
Use the below to construct a 3000-words essay. Assume that Trinbago is a small country that produces wine and motor vehicles, where motor vehicles are capital-intensive. Trinbago is also capital intensive, and the standard Heckscher -Ohlin (H-O) assumptions hold. The other country in the model is Vincyland. Questions: Give an extensive background on the Heckscher-Ohlin Trade model and then answer the following questions. (a) Based on the H-O assumptions, which good should Vincyland export, and why? (b) What trade pattern would occur if the Leontief Paradox holds? Which two (2) explanations of the Leontief Paradox most strongly support the H-O theory? Give the reasons. (c) In autarky, according to Ohlin, how does Trinbago’s relative price of labor compare to Vincyland’s? (d) Show the necessary graphs to fully explain all requested effects. Ensure to label graphs and give brief explanations. (e) Given that Vincyland is a small country, examine the partial equilibrium welfare…