Consider the case in which there are two countries, Togo and Qatar existing in a classical world in which labour is the

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Consider The Case In Which There Are Two Countries Togo And Qatar Existing In A Classical World In Which Labour Is The 1 (155.03 KiB) Viewed 41 times

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Consider the case in which there are two countries, Togo and Qatar existing in a classical world in which labour is the only factor of production. You are informed that in Togo one labour hour produces 6 bolts of Linen while in Qatar one labour hour produces 1 bolt of linen. You are also told that one labour hour produces 1 barrel of oil in Togo and one labour hour produces 3 barrels of oil in Qatar. You are further informed that each country has up to 180 hours available for productive use. Answer the following questions: a) Determine the autarky real exchange ratios in each country b) Indicate the commodity in which Togo and Qatar have absolute advantage c) How much would Togo and Qatar gain if 6 bolts of Linen were exchanged for 3 barrels of oil during the post autarky period? d) What if 6 bolts of linen were exchanged for 6 barrels of oil? e) Construct the production possibility curve for each country. Clearly label your diagram