problem set 2

problem set 2 - FBE 462 PROBLEM SET #2 1. C 2. B 1. a.)...

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FBE 462 PROBLEM SET #2 1. C 2. B 1. a.) Pretzelvania has the absolute advantage in chocolate and beer b.) pretzelvania has a comparative advantage in chocolate because the opportunity cost of 1 box of chocolate is .4 cases of beer 6/15 = .4 which is lower than Toblerenia (.5) c.) When trade is opened up the country imports what would have been the expensive good and exports what would have been the cheap good. As it stands pretzelvania would export chocolate because 6/15 is .4 compared with Toberonia’s price which is 4/8= .5 meaning Toberlonia would import chocolate. Tobleronia would export beer because 8/4 = 2 opposed to pretzelvania who would import beer because their price is 15/6 = 2.5 d.) If this happens tobleronia would now import beer because 12/4 = 3 opposed to pretzelvania which has a ratio of 15/6 = 2.5 so they would now export 2. b.) The quantity of robes consumed increases 3. a.) True because this is what happens with comparative advantage
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This note was uploaded on 02/15/2011 for the course FBE 462 at USC.

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problem set 2 - FBE 462 PROBLEM SET #2 1. C 2. B 1. a.)...

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