6. Consider a case where a country can produce Good X and Good Y, using increasing...

6. Consider a case where a country can produce Good X and Good Y, using increasing cost technology. The internal price of Good Y for the country is 1. The world price of Good Y is 2. Draw a graph with Good X on the horizontal axis and show the country (i) with no trade and (ii) optimally trading. Be sure to correctly draw the indifference curves and label all the curves, lines, and axes of your graph.

a) What circumstance must be true about economic tradeoffs for a country to reach the highest attainable indifference curve?

(b) What happens to this country’s level of economic wellbeing when it changes from trade to no trade? How do you know?

(d) With trade, what product does the country import? On your graph, show the amount.

(e) With trade, what product does the country export? On your graph, show the amount.

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Country A requires 1 unit of labor to produce 1 unit of good X, and 6...

Country A requires 1 unit of labor to produce 1 unit of good X, and 6 units of labor to produce 1 unit of good Y. While country B requires 6 units of labor to produce 1 unit of good X, and 8 units of labor to produce 1 unit of good Y, which of the following is true: (a) Country A has comparative advantage in good Y (b) Country B has comparative advantage in good Y (c) Country B...

Country X and country Y both produce bicycles and sweaters. In country X each worker in...

Country X and country Y both produce bicycles and sweaters. In country X each worker in a day can produce either 5 bicycles or 20 sweaters. In country Y each worker in a day can produce either 3 bicycles of 18 sweaters. Each country has constant opportunity cost of production and each has 100 workers. Enter whole numbers in each blank. In country X the opportunity cost of producing one bicycle is ____ sweaters and in country Y the opportunity...

A Consumer's bundle includes goods X and Y, where good X is an inferior good, and...

A Consumer's bundle includes goods X and Y, where good X is an inferior good, and good Y is a normal good. According to (and only focusing on) the income effect ( and ignoring all other effects) the impact of a price decrease of good X will be a ____________ a. substituting consumption away from Y to good X b. decreased consumption of X c. Increased consumption of X

Suppose a country is exporting good X and importing good Y at current world prices. a....

Suppose a country is exporting good X and importing good Y at current world prices. a. Draw and carefully label a PPF-indifference curve diagram showing this situation. b. Explain, in both words and in a copy of your graph from part a., how a change in consumer tastes, everything else held constant, can cause this country to: i) not trade anymore and ii) become an importer of good X and exporter of good Y.

Suppose there are two countries A and B, and they produce good X and Y. Assume...

Suppose there are two countries A and B, and they produce good X and Y. Assume perfect competitive market and labor is the only factor of production. Answer following questions based on David Ricardo's comparative advantage model. In country A, 2 laborers are required to produce one unit of good X and three laborers are required to produce one unit of good Y. In country B, five laborers are required to produce one unit of good X and six laborers...

Consider the following projects X and Y where the firm can choose only once. Project X...

Consider the following projects X and Y where the firm can choose only once. Project X costs $600 and has cash flows of $400 in each of the next two years. Project B also costs $ 600 and generates cash flows $500 and $275 for the next two years, respectively. Sketch a net present value profile (graphs) for each of these projects. For graphs you may use approximation Which project should the firm choose if the cost of capital is...

Suppose Ireland and Canada produce two goods. Good Y is labor intensive and Good X is...

Suppose Ireland and Canada produce two goods. Good Y is labor intensive and Good X is capital intensive a. Given the above PPFs, which country is relatively labor-abundant? Capital-abundant? Which good will Ireland export? What about Canada? Explain. b. Suppose the countries have identical preferences. Show the no-trade equilibrium and the free-trade equilibrium. Be sure to explain the production and consumption label points for both economies. c. Compare the relative factor prices in the two countries before and after trade,...

Consider the following projects, X and Y where the firm can only choose one.

3Consider the following projects, X and Y where the firm can only choose one. Project X costs $600 and has cash flows of $400 in each of the next 2 years. Project also costs $600 and generates cash flows of $500 for the next 2 years respectively. Which investment should the firm choose the cost of capital is 25 percent? Another since both the projects have negative NPV Another, since both the projects have positive NPV Project X sine X has a higher...

Consider walks in the X-Y plane where each step is R: (x, y)→(x+1, y) or U:...

Consider walks in the X-Y plane where each step is R: (x, y)→(x+1, y) or U: (x, y)→(x, y+a), with a a positive integer. There are five walks that contain a point on the line x + y = 2, namely: RR, RU1, U1R, U1U1, and U2. Let a_n denote the number of walks that contain a point on the line x + y = n (so a_2 = 5). Show that a_n = F_{2n}, where F_n are the Fibonacci numbers...

Consider a country, Home, populated by a labor force of 90 workers. The country can produce...

Consider a country, Home, populated by a labor force of 90 workers. The country can produce two goods, Apples and Bananas. Labor is the only factor of production and it can freely move across sectors. It takes 1/2 unit of labor to produce one Apple; similarly, and it takes 1/2 unit of labor to produce a Banana. Notes: If the country does not produce any bananas , then , it can produce (90)/(1/2) = 90(2) = 180 apples. If the...

Subjects