lectureAssignment17

lectureAssignment17 - ECONOMICS 100 Lecture Assignment # 17...

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ECONOMICS 100 Lecture Assignment # 17 (The Gains from Trade) Source: LR11, Chapter 33 and skim Chapter 34; LR10, Chapter 34 and skim Chapter 35. 1. Gains from Trade - Absolute Advantage Assume that Canada and Russia are both producing wheat and vodka, utilizing labour input only, according to the following information: Output from 1 unit of labour Wheat Or Vodka (Bushels) (Bottles) Canada 30 5 Russia 10 20 Ignore transportation costs and exchange rates. 1.1 Show that "world" (i.e. Canadian plus Russian) production can be increased through reallocating Canadian effort toward wheat production and Russian effort toward vodka production. 1.2 Suppose that perfect competition prevails. Compute the wheat/vodka price ratio in both countries. Now argue that trade can make both countries better off. 1.3 Compute the opportunity costs of production in each country. Now use this information to argue that trade can make both countries better off.
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2. Gains from Trade - Comparative Advantage Repeat 1.1 - 1.3 on the basis of the following:
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lectureAssignment17 - ECONOMICS 100 Lecture Assignment # 17...

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