Labor Requirements in Worker-Hours (per gallon of output) Netherlands Belgium Beer 2 3 Wine 8 6...

Labor Requirements in Worker-Hours (per gallon of output)
Netherlands Belgium
Beer 2 3
Wine 8 6
That is, 1 gallon of beer can be produced from ____________ hours of labor in the Netherlands or
____________ hours of labor in Belgium, and 1 gallon of wine can be produced from
_____________ hours of labor in the Netherlands or ______________ hours of labor in Belgium.
Assuming the cost of labor is the same in both countries, which of them has an absolute advantage in
beer production? In wine production?
____________has an absolute advantage in beer production
____________has an absolute advantage in wine production
Which country has a comparative advantage in beer production? In wine production?
____________has a comparative advantage in beer production
____________has a comparative advantage in wine production
In a free trade equilibrium, which country will export beer and which country will export wine?
____________will export beer
____________will export wine

Solutions

Expert Solution

That is, 1 gallon of beer can be produced from 2 hours of labor in the Netherlands or
3 hours of labor in Belgium, and 1 gallon of wine can be produced from
______8_______ hours of labor in the Netherlands or _____6_________ hours of labor in Belgium.
Assuming the cost of labor is the same in both countries, which of them has an absolute advantage in
beer production? In wine production?
____NETHERLANDS________has an absolute advantage in beer production
_____BELGIUM_______has an absolute advantage in wine production
Which country has a comparative advantage in beer production? In wine production?
____NETHERLANDS________has a comparative advantage in beer production
______BELGIUM______has a comparative advantage in wine production
In a free trade equilibrium, which country will export beer and which country will export wine?
____NETHERLANDS________will export beer
____BELGIUM________will export wine

Rahul Sunny answered 9 months ago

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