Assume Haiti and Antigua are the only two countries that produce and consume fish and sugar....

Assume Haiti and Antigua are the only two countries that produce and consume fish and sugar. In a single year, Haiti can catch 50 tons of fish or produce 500 bags of sugar. In the same growing season, Antigua can catch 50 tons of fish or produce 750 bags of sugar. When the two countries begin trading fish for sugar, we expect the price of fish in Haiti:

Expert Solution

Given,

In a given year, Haiti can catch 50 tons of Fish or produce 500 bags of sugar.

The opportunity cost of catching 1 ton of fish in Haiti = 500/50 = 10 bags of sugar

The opportunity cost of production 1 bag of sugar in Haiti = 50/500 = 0.10 tons of fish

Antigua can catch 50 tons of Fish or produce 750 bags of sugar.

The opportunity cost of catching 1 ton of fish in Antigua = 750/50 = 15 bags of sugar

The opportunity cost of production 1 bag of sugar in Antigua = 50/750 = 0.067 tons of fish

By virtue of having lower opportunity costs respectively, Haiti has a comparative advantage in catching fish while Antigua has a comparative advantage in producing sugar.

Therefore, Haiti specializes in catching fish and hence exports fish. In an exporting country, the price of the good that is exported increases(compared to the domestic equilibrium price) as the excess supply has to be exported to the other country.

Ans: When the two countries start trading, the price of fish in Haiti is expected to rise.

Rahul Sunny answered 8 months ago

Suppose there are two countries – Home and Foreign – that produce only coffee and sugar....

Suppose there are two countries – Home and Foreign – that produce only coffee and sugar. It takes home workers three hours to produce a bag of coffee; and four hours to produce a bag of sugar. Foreign country is less productive – their workers spend seven hours to make a bag of coffee and a half of a day (twelve hours!) to eventually produce a bag of sugar. 1. Which country has an absolute advantage in coffee? Sugar? Explain...

Assume that there are only two countries in the world, Atlantica and Pacifica. Both countries produce...

Assume that there are only two countries in the world, Atlantica and Pacifica. Both countries produce and consume surfboards. The pre-trade equilibrium price of surfboards in Atlantica is $300 and the pre-trade price of surfboards in Pacifica is $400. a) Draw a three-graph diagram to depict the Pacifica, Atlantica, and international markets for surfboards. Assume that free trade opens up between Pacifica and Atlantica yielding an international price of $375 with 10,000 surfboards being traded. Be sure to label all...

Assume that Mexico and Brazil are the only two countries in the world and they produce soybeans and avocados.

Assume that Mexico and Brazil are the only two countries in the world and they produce soybeans and avocados. Mexico 150 million hours of labor per month 5 hours to produce 1 pound of soybeans 3 hours to produce 1 pound of avocados Brazil 300 million hours of labor per month 1 hours to produce 1 pound of soybeans 3 hours to produce 1 pound of avocados For each good, state and explain which country has the comparative advantage.

Albert and Benjamin inhabit a two person world and they could only produce and consume two...

Albert and Benjamin inhabit a two person world and they could only produce and consume two goods: corn and sausage. They both face constant returns to scale. The table below shows the production possibilities for Albert and Benjamin if they are to fully specialize in each good only: Albert Benjamin Corn only 150 200 Sausage only 200 400 Originally Albert and Benjamin practices self-sufficiency and do not trade with each other. An economist proposes to Albert and Benjamin that they...

Paul and Tim inhabit a two person world and they could only produce and consume two...

Paul and Tim inhabit a two person world and they could only produce and consume two goods: cigars and oranges. They both face constant returns to scale. Below is a table that show the production possibilities for both Paul and Tim if they are to fully specialize in each good only: Paul Tim Cigars only 50 100 Oranges only 200 250 a. Who has an absolute advantage in producing cigars? Who has the comparative advantage in producing cigars? b. Who...

Consider two countries: Canada and Sri Lanka. Assume that each can produce only two goods: maple...

Consider two countries: Canada and Sri Lanka. Assume that each can produce only two goods: maple syrup and jaggery. In a single year, Canada can produce 250,000 tons of maple syrup, or 90,000 tons of jaggery. In the same period of time, Sri Lanka can produce 1,000 tons of maple syrup, or 70,000 tons of jaggery. Suppose that both nations are initially in a state of autarky. If Canada were to produce 170,000 tons of maple syrup and 36,000 tons...

Assume throughout that those two countries (Italy and Sweden) are the only two countries in the...

Assume throughout that those two countries (Italy and Sweden) are the only two countries in the world, at least for purposes of trade. There are two goods: shoes and calculators. Consumers in both countries always spend half of their income on shoes and half of their income on calculators. The only factor of production is labour. Each Italian worker can produce 1 shoe or 2 calculators per unit of time. Each Swedish worker can produce 4 shoes or 2 calculators...

Suppose that tea and sugar are perfect complements and that a consumer will only consume 1...

Suppose that tea and sugar are perfect complements and that a consumer will only consume 1 cup of tea with 2 cubes of sugar. The price of tea is $2/cup. (A fraction of an unsweetened cup of tea would cost that same fraction of $2). The price sugar is $0.25 per cube. A consumer has set aside $25 to spend on sweetened tea each week. Graphically depict and identify the set of feasible consumption, the budget line and its horizontal...

2. Albert and Benjamin inhabit a two person world and they could only produce and consume...

2. Albert and Benjamin inhabit a two person world and they could only produce and consume two goods: corn and sausage. They both face constant returns to scale. The table below shows the production possibilities for Albert and Benjamin if they are to fully specialize in each good only: Albert Benjamin Corn only 150 200 Sausage only 200 400 Originally Albert and Benjamin practices self-sufficiency and do not trade with each other. An economist proposes to Albert and Benjamin that...

Assume that the world consists of two countries – US and Germany. Both the countries produce...

Assume that the world consists of two countries – US and Germany. Both the countries produce two goods – Automobiles and Corn. There are three factors of production, Capital, Land and Labour. The specific factor in Automobiles is Capital while in Corn it is Land. Labour is used in the production of both the goods. Germany is assumed to be relatively more well- endowed in Capital than the US, while US is relatively more well-endowed in Land than Germany. Answer...

Question