In: Economics
Suppose that France has 175,000 gallons of milk, Germany has 600,000 cookies, The U.S. has 1,000,000 cookies. France traded 50,000 gallons milk to Germany for 120,000 cookies; and the U.S. traded 192,000 cookies to France for 80,000 gallons of milk.
a) What is the price of milk in terms of cookies? (i.e. what is the amount of cookies you can get for one gallon of milk?)
b) What is the price of cookies in terms of milk? (i.e. what is the amount of milk you can get for one cookie?)
c) What is the final consumption opportunities for France, Germany, and the U.S. (what is the quantity of each product that is available to each of these countries as a result of trade?)
France has = 175000 gallons of milk
Germany has = 600000 cookies
US has = 192000 cokies
France traded milk for cokies with Germany
France gets 120000 cokies when he gives 50000 gallons of milk
50000 gallons of milk = 120000 cokies
so 1 gallons of milk = 120000/50000
= 2.4 cokies
price of milk in terms of cokies = 120000/50000
= 2.4 cokies
or France with US
80000 gallons of milk = 192000 cokies
so 1 gallons of milk = 192000/80000
= 2.4 cokies
price of cookies in terms of milk
120000 cokies = 50000 gallons of milk ( Germany with france)
1 cokies = 50000/120000
= 0.416
= 0.42 gallons of milk
192000 cokies = 80000 galons of milk (France with US)
1 cokies = 80000/192000
= 0.416
price of 1 cokies = 0.42 gallns of milk
total production of milk in France = 175000 gallons
France trade with Germany
france give Germany 50000 gallons of milk in exchange of 120000 cokies
after trade with france Germany have = 50000 gallons of milk and (600000 - 120000) = 480000 cokies
france now have after trade with Germany (175000 - 50000) = 1250000 gallons of milk and 120000 cokies
France trade with US
france give US 800000 gallons of milk in exchange of 192000 cokies
after trade with france US have = 80000 gallons of milk and (1000000-192000) = 808000 cokies
france after trade with (Germany and Us ) have (125000-80000) = 45000 gallons of milk and (120000+192000) = 312000 cokies