To ascertain: The price of wine in terms of cloth in country E.

Question

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Answer 1

Question

Chapter 18, Problem 1TY

a)

To determine

To ascertain: The price of wine in terms of cloth in country E.

a)

Expert Solution

Explanation of Solution

If there is no trade, the price of wine in terms of cloth in E is = 8/2 = 4 yards of cloth/ barrel of wine.

Country	Cloth in yards	Opportunity cost of E in terms of wine	wine in barrels	Opportunity cost of P in terms of cloth
E	8	2/8 = 0.25	2	8/2 = 4
P	12	6/12 = 0.5	6	12/6 = 2

b)

To determine

To ascertain: The price of wine in terms of cloth in country P.

b)

Expert Solution

Explanation of Solution

If there is no trade, the price of wine in terms of cloth in P is = 12/6 = 2 yards of cloth/ barrel of wine.

Country	Cloth in yards	Opportunity cost of E in terms of wine	wine in barrels	Opportunity cost of P in terms of cloth
E	8	2/8 = 0.25	2	8/2 = 4
P	12	6/12 = 0.5	6	12/6 = 2

c)

To determine

To draw: The PPF for E and P.

c)

Expert Solution

Explanation of Solution

The construction of PPF for both the countries is as follows:-

MACROECONOMICS (LOOSELEAF)-PACKAGE, Chapter 18, Problem 1TY

d)

To determine

To ascertain: The country that has absolute advantage and comparative advantage.

d)

Expert Solution

Explanation of Solution

	Absolute adv.	Comparative adv.
Wine	P	P
Cloth	P	E

P can produce more of cloth and wine using a week of labour; hence, it has an absolute advantage in both these products. However, the opportunity cost of producing cloth for P is more (6/12) than the same cost in E (2/8). Therefore, P has a comparative advantage in production of wine whereas E has a comparative advantage in production of cloth.

e)

To determine

To ascertain: The country that specialize in particular good and exporting the same.

e)

Expert Solution

Explanation of Solution

A country which has comparative advantage in production of good should specialize in production of that particular good and trade it with another country for another good.

E should produce cloth and export cloth and import wine from P. P should specialize and export wine for cloth with E.

f)

To determine

To ascertain: The price at which the trade should take place.

f)

Expert Solution

Explanation of Solution

An offer of 3 yards of cloth/1 barrel of wine is better than P's own production of 2 yards of cloth/1 barrel of wine

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Answer

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As indicated in the attached image, U.S. earnings for high- and low-skill workers as measured by educational attainment began diverging in the 1980s. The remaining questions in this problem set use the model for the labor market developed in class to walk through potential explanations for this trend. 1. Assume that there are just two types of workers, low- and high-skill. As a result, there are two labor markets: supply and demand for low-skill workers and supply and demand for high-skill workers. Using two carefully drawn labor-market figures, show that an increase in the demand for high skill workers can explain an increase in the relative wage of high-skill workers. 2. Using the same assumptions as in the previous question, use two carefully drawn labor-market figures to show that an increase in the supply of low-skill workers can explain an increase in the relative wage of high-skill workers.

Answer 2

Question

Chapter 18, Problem 1TY

a)

To determine

To ascertain: The price of wine in terms of cloth in country E.

a)

Expert Solution

Explanation of Solution

If there is no trade, the price of wine in terms of cloth in E is = 8/2 = 4 yards of cloth/ barrel of wine.

Country	Cloth in yards	Opportunity cost of E in terms of wine	wine in barrels	Opportunity cost of P in terms of cloth
E	8	2/8 = 0.25	2	8/2 = 4
P	12	6/12 = 0.5	6	12/6 = 2

b)

To determine

To ascertain: The price of wine in terms of cloth in country P.

b)

Expert Solution

Explanation of Solution

If there is no trade, the price of wine in terms of cloth in P is = 12/6 = 2 yards of cloth/ barrel of wine.

Country	Cloth in yards	Opportunity cost of E in terms of wine	wine in barrels	Opportunity cost of P in terms of cloth
E	8	2/8 = 0.25	2	8/2 = 4
P	12	6/12 = 0.5	6	12/6 = 2

c)

To determine

To draw: The PPF for E and P.

c)

Expert Solution

Explanation of Solution

The construction of PPF for both the countries is as follows:-

MACROECONOMICS (LOOSELEAF)-PACKAGE, Chapter 18, Problem 1TY

d)

To determine

To ascertain: The country that has absolute advantage and comparative advantage.

d)

Expert Solution

Explanation of Solution

	Absolute adv.	Comparative adv.
Wine	P	P
Cloth	P	E

P can produce more of cloth and wine using a week of labour; hence, it has an absolute advantage in both these products. However, the opportunity cost of producing cloth for P is more (6/12) than the same cost in E (2/8). Therefore, P has a comparative advantage in production of wine whereas E has a comparative advantage in production of cloth.

e)

To determine

To ascertain: The country that specialize in particular good and exporting the same.

e)

Expert Solution

Explanation of Solution

A country which has comparative advantage in production of good should specialize in production of that particular good and trade it with another country for another good.

E should produce cloth and export cloth and import wine from P. P should specialize and export wine for cloth with E.

f)

To determine

To ascertain: The price at which the trade should take place.

f)

Expert Solution

Explanation of Solution

An offer of 3 yards of cloth/1 barrel of wine is better than P's own production of 2 yards of cloth/1 barrel of wine

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Answer 3

Question

Chapter 18, Problem 1TY

a)

To determine

To ascertain: The price of wine in terms of cloth in country E.

a)

Expert Solution

Explanation of Solution

If there is no trade, the price of wine in terms of cloth in E is = 8/2 = 4 yards of cloth/ barrel of wine.

Country	Cloth in yards	Opportunity cost of E in terms of wine	wine in barrels	Opportunity cost of P in terms of cloth
E	8	2/8 = 0.25	2	8/2 = 4
P	12	6/12 = 0.5	6	12/6 = 2

b)

To determine

To ascertain: The price of wine in terms of cloth in country P.

b)

Expert Solution

Explanation of Solution

If there is no trade, the price of wine in terms of cloth in P is = 12/6 = 2 yards of cloth/ barrel of wine.

Country	Cloth in yards	Opportunity cost of E in terms of wine	wine in barrels	Opportunity cost of P in terms of cloth
E	8	2/8 = 0.25	2	8/2 = 4
P	12	6/12 = 0.5	6	12/6 = 2

c)

To determine

To draw: The PPF for E and P.

c)

Expert Solution

Explanation of Solution

The construction of PPF for both the countries is as follows:-

MACROECONOMICS (LOOSELEAF)-PACKAGE, Chapter 18, Problem 1TY

d)

To determine

To ascertain: The country that has absolute advantage and comparative advantage.

d)

Expert Solution

Explanation of Solution

	Absolute adv.	Comparative adv.
Wine	P	P
Cloth	P	E

P can produce more of cloth and wine using a week of labour; hence, it has an absolute advantage in both these products. However, the opportunity cost of producing cloth for P is more (6/12) than the same cost in E (2/8). Therefore, P has a comparative advantage in production of wine whereas E has a comparative advantage in production of cloth.

e)

To determine

To ascertain: The country that specialize in particular good and exporting the same.

e)

Expert Solution

Explanation of Solution

A country which has comparative advantage in production of good should specialize in production of that particular good and trade it with another country for another good.

E should produce cloth and export cloth and import wine from P. P should specialize and export wine for cloth with E.

f)

To determine

To ascertain: The price at which the trade should take place.

f)

Expert Solution

Explanation of Solution

An offer of 3 yards of cloth/1 barrel of wine is better than P's own production of 2 yards of cloth/1 barrel of wine

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Answer 4

Question

Chapter 18, Problem 1TY

a)

To determine

To ascertain: The price of wine in terms of cloth in country E.

a)

Expert Solution

Explanation of Solution

If there is no trade, the price of wine in terms of cloth in E is = 8/2 = 4 yards of cloth/ barrel of wine.

Country	Cloth in yards	Opportunity cost of E in terms of wine	wine in barrels	Opportunity cost of P in terms of cloth
E	8	2/8 = 0.25	2	8/2 = 4
P	12	6/12 = 0.5	6	12/6 = 2

b)

To determine

To ascertain: The price of wine in terms of cloth in country P.

b)

Expert Solution

Explanation of Solution

If there is no trade, the price of wine in terms of cloth in P is = 12/6 = 2 yards of cloth/ barrel of wine.

Country	Cloth in yards	Opportunity cost of E in terms of wine	wine in barrels	Opportunity cost of P in terms of cloth
E	8	2/8 = 0.25	2	8/2 = 4
P	12	6/12 = 0.5	6	12/6 = 2

c)

To determine

To draw: The PPF for E and P.

c)

Expert Solution

Explanation of Solution

The construction of PPF for both the countries is as follows:-

MACROECONOMICS (LOOSELEAF)-PACKAGE, Chapter 18, Problem 1TY

d)

To determine

To ascertain: The country that has absolute advantage and comparative advantage.

d)

Expert Solution

Explanation of Solution

	Absolute adv.	Comparative adv.
Wine	P	P
Cloth	P	E

P can produce more of cloth and wine using a week of labour; hence, it has an absolute advantage in both these products. However, the opportunity cost of producing cloth for P is more (6/12) than the same cost in E (2/8). Therefore, P has a comparative advantage in production of wine whereas E has a comparative advantage in production of cloth.

e)

To determine

To ascertain: The country that specialize in particular good and exporting the same.

e)

Expert Solution

Explanation of Solution

A country which has comparative advantage in production of good should specialize in production of that particular good and trade it with another country for another good.

E should produce cloth and export cloth and import wine from P. P should specialize and export wine for cloth with E.

f)

To determine

To ascertain: The price at which the trade should take place.

f)

Expert Solution

Explanation of Solution

An offer of 3 yards of cloth/1 barrel of wine is better than P's own production of 2 yards of cloth/1 barrel of wine

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 18, Problem 1TY

a)

To determine

To ascertain: The price of wine in terms of cloth in country E.

a)

Expert Solution

Explanation of Solution

If there is no trade, the price of wine in terms of cloth in E is = 8/2 = 4 yards of cloth/ barrel of wine.

Country	Cloth in yards	Opportunity cost of E in terms of wine	wine in barrels	Opportunity cost of P in terms of cloth
E	8	2/8 = 0.25	2	8/2 = 4
P	12	6/12 = 0.5	6	12/6 = 2

b)

To determine

To ascertain: The price of wine in terms of cloth in country P.

b)

Expert Solution

Explanation of Solution

If there is no trade, the price of wine in terms of cloth in P is = 12/6 = 2 yards of cloth/ barrel of wine.

Country	Cloth in yards	Opportunity cost of E in terms of wine	wine in barrels	Opportunity cost of P in terms of cloth
E	8	2/8 = 0.25	2	8/2 = 4
P	12	6/12 = 0.5	6	12/6 = 2

c)

To determine

To draw: The PPF for E and P.

c)

Expert Solution

Explanation of Solution

The construction of PPF for both the countries is as follows:-

MACROECONOMICS (LOOSELEAF)-PACKAGE, Chapter 18, Problem 1TY

d)

To determine

To ascertain: The country that has absolute advantage and comparative advantage.

d)

Expert Solution

Explanation of Solution

	Absolute adv.	Comparative adv.
Wine	P	P
Cloth	P	E

P can produce more of cloth and wine using a week of labour; hence, it has an absolute advantage in both these products. However, the opportunity cost of producing cloth for P is more (6/12) than the same cost in E (2/8). Therefore, P has a comparative advantage in production of wine whereas E has a comparative advantage in production of cloth.

e)

To determine

To ascertain: The country that specialize in particular good and exporting the same.

e)

Expert Solution

Explanation of Solution

A country which has comparative advantage in production of good should specialize in production of that particular good and trade it with another country for another good.

E should produce cloth and export cloth and import wine from P. P should specialize and export wine for cloth with E.

f)

To determine

To ascertain: The price at which the trade should take place.

f)

Expert Solution

Explanation of Solution

An offer of 3 yards of cloth/1 barrel of wine is better than P's own production of 2 yards of cloth/1 barrel of wine

Answer 6

Chapter 18, Problem 1TY

a)

To determine

To ascertain: The price of wine in terms of cloth in country E.

a)

Expert Solution

Explanation of Solution

If there is no trade, the price of wine in terms of cloth in E is = 8/2 = 4 yards of cloth/ barrel of wine.

Country	Cloth in yards	Opportunity cost of E in terms of wine	wine in barrels	Opportunity cost of P in terms of cloth
E	8	2/8 = 0.25	2	8/2 = 4
P	12	6/12 = 0.5	6	12/6 = 2

Answer 7

Chapter 18, Problem 1TY

a)

To determine

To ascertain: The price of wine in terms of cloth in country E.

Answer 8

a)

Expert Solution

Explanation of Solution

If there is no trade, the price of wine in terms of cloth in E is = 8/2 = 4 yards of cloth/ barrel of wine.

Country	Cloth in yards	Opportunity cost of E in terms of wine	wine in barrels	Opportunity cost of P in terms of cloth
E	8	2/8 = 0.25	2	8/2 = 4
P	12	6/12 = 0.5	6	12/6 = 2

Answer 9

a)

Expert Solution

Answer 10

a)

Expert Solution

Answer 11

Expert Solution

Answer 12

b)

To determine

To ascertain: The price of wine in terms of cloth in country P.

b)

Expert Solution

Explanation of Solution

If there is no trade, the price of wine in terms of cloth in P is = 12/6 = 2 yards of cloth/ barrel of wine.

Country	Cloth in yards	Opportunity cost of E in terms of wine	wine in barrels	Opportunity cost of P in terms of cloth
E	8	2/8 = 0.25	2	8/2 = 4
P	12	6/12 = 0.5	6	12/6 = 2

Answer 13

b)

To determine

To ascertain: The price of wine in terms of cloth in country P.

Answer 14

b)

Expert Solution

Explanation of Solution

If there is no trade, the price of wine in terms of cloth in P is = 12/6 = 2 yards of cloth/ barrel of wine.

Country	Cloth in yards	Opportunity cost of E in terms of wine	wine in barrels	Opportunity cost of P in terms of cloth
E	8	2/8 = 0.25	2	8/2 = 4
P	12	6/12 = 0.5	6	12/6 = 2

Answer 15

b)

Expert Solution

Answer 16

b)

Expert Solution

Answer 17

Expert Solution

Answer 18

c)

To determine

To draw: The PPF for E and P.

c)

Expert Solution

Explanation of Solution

The construction of PPF for both the countries is as follows:-

MACROECONOMICS (LOOSELEAF)-PACKAGE, Chapter 18, Problem 1TY

Answer 19

c)

To determine

To draw: The PPF for E and P.

Answer 20

c)

Expert Solution

Explanation of Solution

The construction of PPF for both the countries is as follows:-

MACROECONOMICS (LOOSELEAF)-PACKAGE, Chapter 18, Problem 1TY

Answer 21

c)

Expert Solution

Answer 22

c)

Expert Solution

Answer 23

Expert Solution

Answer 24

d)

To determine

To ascertain: The country that has absolute advantage and comparative advantage.

d)

Expert Solution

Explanation of Solution

	Absolute adv.	Comparative adv.
Wine	P	P
Cloth	P	E

P can produce more of cloth and wine using a week of labour; hence, it has an absolute advantage in both these products. However, the opportunity cost of producing cloth for P is more (6/12) than the same cost in E (2/8). Therefore, P has a comparative advantage in production of wine whereas E has a comparative advantage in production of cloth.

Answer 25

d)

To determine

To ascertain: The country that has absolute advantage and comparative advantage.

Answer 26

d)

Expert Solution

Explanation of Solution

	Absolute adv.	Comparative adv.
Wine	P	P
Cloth	P	E

P can produce more of cloth and wine using a week of labour; hence, it has an absolute advantage in both these products. However, the opportunity cost of producing cloth for P is more (6/12) than the same cost in E (2/8). Therefore, P has a comparative advantage in production of wine whereas E has a comparative advantage in production of cloth.

Answer 27

d)

Expert Solution

Answer 28

d)

Expert Solution

Answer 29

Expert Solution

Answer 30

e)

To determine

To ascertain: The country that specialize in particular good and exporting the same.

e)

Expert Solution

Explanation of Solution

A country which has comparative advantage in production of good should specialize in production of that particular good and trade it with another country for another good.

E should produce cloth and export cloth and import wine from P. P should specialize and export wine for cloth with E.

Answer 31

e)

To determine

To ascertain: The country that specialize in particular good and exporting the same.

Answer 32

e)

Expert Solution

Explanation of Solution

A country which has comparative advantage in production of good should specialize in production of that particular good and trade it with another country for another good.

E should produce cloth and export cloth and import wine from P. P should specialize and export wine for cloth with E.

Answer 33

e)

Expert Solution

Answer 34

e)

Expert Solution

Answer 35

Expert Solution

Answer 36

f)

To determine

To ascertain: The price at which the trade should take place.

f)

Expert Solution

Explanation of Solution

An offer of 3 yards of cloth/1 barrel of wine is better than P's own production of 2 yards of cloth/1 barrel of wine

Answer 37

f)

To determine

To ascertain: The price at which the trade should take place.

Answer 38

f)

Expert Solution

Explanation of Solution

An offer of 3 yards of cloth/1 barrel of wine is better than P's own production of 2 yards of cloth/1 barrel of wine

Answer 39

f)

Expert Solution

Answer 40

f)

Expert Solution

Answer 41

Expert Solution

Answer 42

Ch. 18.A - Prob. 1TY Ch. 18 - Prob. 1TY Ch. 18 - Prob. 2TY Ch. 18 - Prob. 1DQ Ch. 18 - Prob. 2DQ Ch. 18 - Prob. 3DQ Ch. 18 - Prob. 4DQ Ch. 18 - Prob. 5DQ Ch. 18 - Prob. 6DQ Ch. 18 - Prob. 7DQ

To ascertain: The price of wine in terms of cloth in country E.

To ascertain: The price of wine in terms of cloth in country E.

Explanation of Solution

To ascertain: The price of wine in terms of cloth in country P.

Explanation of Solution

To draw: The PPF for E and P.

Explanation of Solution

To ascertain: The country that has absolute advantage and comparative advantage.

Explanation of Solution

To ascertain: The country that specialize in particular good and exporting the same.

Explanation of Solution

To ascertain: The price at which the trade should take place.

Explanation of Solution

Want to see more full solutions like this?

Chapter 18 Solutions