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Microeconomics 6th Edition by Robert Hall, Shirley Kuiper, Marc Lieberman
Edition 6ISBN: 978-1133708735Microeconomics 6th Edition by Robert Hall, Shirley Kuiper, Marc Lieberman
Edition 6ISBN: 978-1133708735 Exercise 6
The following table shows the hypothetical labor requirements per ton of wool and per hand-knotted rug,for New Zealand and for India.
Labor Requirements per Unit
a. Which country has an absolute advantage in each product?
b. Calculate the opportunity cost in each country for each of the two products. Which country has a comparative advantage in each product?
c. If India produces one more rug and exports it to New Zealand,what is the lowest price (measured in tons of wool)that it would accept? What is the highest price that New Zealand would pay? Within what range will the equilibrium terms of trade lie?
Labor Requirements per Unit
a. Which country has an absolute advantage in each product?b. Calculate the opportunity cost in each country for each of the two products. Which country has a comparative advantage in each product?
c. If India produces one more rug and exports it to New Zealand,what is the lowest price (measured in tons of wool)that it would accept? What is the highest price that New Zealand would pay? Within what range will the equilibrium terms of trade lie?
Explanation
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a)A country which enjoys absolute advant...
Microeconomics 6th Edition by Robert Hall, Shirley Kuiper, Marc Lieberman
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