Comparative Advantage Problem Set Suppose Germany And France Produce Cars And Wine And Use The Labor Units As Described 1 (73.09 KiB) Viewed 46 times
Comparative Advantage Problem Set Suppose Germany And France Produce Cars And Wine And Use The Labor Units As Described 2 (58.7 KiB) Viewed 46 times
Comparative Advantage Problem Set Suppose Germany And France Produce Cars And Wine And Use The Labor Units As Described 3 (51.85 KiB) Viewed 46 times
COMPARATIVE ADVANTAGE PROBLEM SET Suppose Germany and France produce cars and wine, and use the labor units as described in the table. Opportunity Costs (OC) Labor units required to produce cars and wine 1 car 1 case of wine OC of 1 case of wine Germany France 8 10 4 2 1. Calculate the opportunity cost of producing 1 car and the opportunity cost of producing one case of wine for Germany. Germany (40, 20) France (40, 20) OC of 1 car 2. Calculate the opportunity cost of producing 1 case of wine and the opportunity cost of producing one case of wine for France. 3. Which country has the comparative advantage of producing cars? 4. Which country has the comparative advantage of producing wine? Total World Suppose each country devotes 40 units of labor to producing cars and 20 units of labor producing cases of wine. Also assume the countries do not trade therefore production consumption for each country. Calculate the level of production and consumption for each country. Production Consumption with NO TRADE Cars Cases of Wine 5. How many units of cars and how many cases of wine does Germany produce in a closed economy? 6. How many units of cars and how many cases of wine does France produce in a closed economy? 7. What is the total world production of cars? 8. What is the total world production of cases of wine? Now suppose France shifts 10 units of labor from the production of cars to the production of wine, and Germany shifts 16 units of labor from the production of wine to the production of cars. Production with Specialization
States) Now suppose France shifts 10 units of labor from the production of cars to the production of wine, and Germany shifts 16 units of labor from the production of wine to the production of cars. Germany (56, 4) France (30, 30) Total World Production with Specialization Cars COMPARATIVE ADVANTAGE PROBLEM SET 9. How many units of cars and how many cases of wine does Germany produce in an open economy? Germany France Total (world) Cases of Wine 10. How many units of cars and how many cases of wine does France produce in an open economy? 11. What is the total world production of cars? 12. What is the total world production of cases of wine? Combine the no trade and specialization results from the previous two tables into one table. Consumption No Trade (table #2 results) Consumption with Specialization and Trade cars wine cars wine Fo
COMPARATIVE ADVANTAGE PROBLEM SET 9. How many units of cars and how many cases of wine does Germany produce in an open economy? 10. How many units of cars and how many cases of wine does France produce in an open economy? 11. What is the total world production of cars? 12. What is the total world production of cases of wine? Combine the no trade and specialization results from the previous two tables into one table. Consumption No Trade (table #2 results) Consumption with Specialization and Trade Germany France Total (world) cars wine cars wine. Assume Germany is willing to trade one car for 4 cases of wine. 13. Assume Germany is willing to trade one car for 4 cases of wine. Are both countries better off with specialization and trade when compared to the no trade results? Explain your answer.
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