08 Jun Question 1. Solve the following:
Question
1. Solve the following:
You are given the information shown in the table about production relationships in the United Kingdom and the rest of the world.
In the United Kingdom
In the Rest of the World
Labor hours to make:
1 umbrella
3.00
2.00
1 unit of corn
1.00
0.25
You make several Ricardian assumptions: these are the only two commodities, there are constant ratios of input to output whatever the level of output of rice and cloth, and competition prevails in all markets.
a. Does the United Kingdom have an absolute advantage in producing umbrellas? Corn?
b. What is the opportunity cost of producing an umbrella in the UK? Corn?
c. Does the United Kingdom have a comparative advantage in producing umbrella? Corn?
d. If no international trade were allowed, what price range of umbrellas would prevail between the UK and the rest of the world?
2. Refer to Figure below. The opportunity cost of one unit of cheese production in Vintland is __________ liters of wine and in the Moonited Republic is __________ liters of wine.
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3. The following cost data is for the mythical land of Painduvin, a capital-abundant country where they produce nothing but bread and wine using only capital and labor as inputs.
1 unit of Bread 1 unit of Wine
Capital Input 5 euros 20 euros
Labor Input 4 euros 10 euros
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