Without trade, what is the relative price of wheat in terms of cloth in Pakistan? What is the price in China?

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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Q.3      Suppose the following table given below describes the production possibilities of Rice and Cloth for Pakistan and China:

 

Wheat (Kgs/hour)

Cloth (Meters/hour)

PAKISTAN

5

10

CHINA

10

40

 

  1. Without trade, what is the relative price of wheat in terms of cloth in Pakistan?

What is the price in China?

  1. Which country has an absolute advantage in the production of each good?
  2. Which country has a comparative advantage in the production of each good?
  3. If both countries trade with each other, which good will each export?
  4. What is the range of prices at which trade can occur?
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