Question
In: Economics
The table below shows the bushels of corn and bottles of wine that China and U.S....
- The table below shows the bushels of corn and bottles of wine that China and U.S. can produce from one day of labor under three different hypothetical situations.
|
Product |
Case 1 |
Case 2 |
Case 3 |
|||
|
China |
U.S. |
China |
U.S. |
China |
U.S. |
|
|
Corn(bushels) |
4 |
2 |
4 |
1 |
4 |
1 |
|
Wine(bottles) |
2 |
1 |
3 |
2 |
2 |
2 |
- Use the table above to show for each case the commodity in which each country has a comparative advantage or disadvantage. Show your work. Answer the question by calculating relative prices.
Solutions
Expert Solution
Comparative Advantage
Case 1
China. U.S.
Corn (Bushels) 4 2
Wine (Bottles) 2 1
China’s opportunity cost of producing corn is (2/4) or ½ bottle of wine.
U.S. opportunity cost of producing corn is (1/2) or ½ bottle of wine.
China’s opportunity cost of producing wine is (4/2)=2 bushels of corn.
U.S.’s opportunity cost of producing wine is (2/1)= 2 bushels of corn.
|
China |
U.S. |
|
|
Corn (Bushels) in terms of wine bottles (Pc/Pw) |
1/2 |
1/2 |
|
Wine (Bottles) in terms of bushels of corn (Pw/Pc) |
2 |
2 |
Case 2
|
China. |
U.S. |
|
|
Corn (Bushels) |
4 |
1 |
|
Wine (Bottles) |
3 |
2 |
China’s opportunity cost of producing corn is (3/4) or 3/4 bottle of wine.
U.S. opportunity cost of producing corn is (2/1) or 2 bottles of wine.
China’s opportunity cost of producing wine is (4/3)=1.33 bushels of corn.
U.S.’s opportunity cost of producing wine is (1/2)= 1/2 bushel of corn.
|
China |
U.S. |
|
|
Corn (Bushels) in terms of wine bottles (Pc/Pw) |
3/4 |
2 |
|
Wine (Bottles) in terms of bushels of corn (Pw/Pc) |
1.33 |
1/2 |
Rahul Sunny answered 1 year agoRelated Solutions
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