Business, 20.03.2020 17:38, kiyahlove7537
Consider the productivity table below: a)Which country has an absolute advantage at making rotids? At making taurons?
Number of Hours Number of Hours
to Make One Rotid to Make One Tauron
Mandovia 50 100
Ducennia 150 20
b) Using the information in the productivity table above, estimate the opportunity
cost of making rotids and taurons in Mandovia and Ducennia.
c) There are 1 billion hours of labor available for making products in Mandovia, and 2 billion hours of labor available for making products in Ducennia. In a no-trade world, let’s assume that half the labor in each region gets used to make each product.
Fill in the table.
Output of Rotids Output of Taurons
Mandovia
Ducennia
Total output
d) Now allow specialization. If each country completely specializes in the in which it holds the comparative advantage, what will be the total output of rotids be? Of taurons? Is total output of each product higher than before?
e)Let’s open for trade. Suppose both sides agree is three rotids for two taurons. Ship 5 million taurons in one direction, and 7.5 million rotids in the other direction. What will be final consumption bundle for Mandovia and Ducennia?
Answers: 2
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