Discussion%20Section%20Week1 - Explain briefly. f. Which...

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Discussion Section 1 Week of January 31 st to February 4th 1. Globalization and Current Events 2. Ricardo’s Model of Trade—An Example The following hypothetical example is a two-country, two-good world in which labor is the only input to production. The following table shows the amount of each good that each country can produce per hour of labor. Stretchy Pants Ugg Boots Australia 20 pairs 15 pairs Pakistan 15 pairs 10 pairs a. Which country has an absolute advantage in the production of Ugg boots? Explain briefly. b. Which country has an absolute advantage in stretchy pants production? Explain briefly. c. Without trade, what is Australia’s opportunity cost for producing 1 pair of Ugg boots (in terms of pairs of stretchy pants)? For producing stretchy pants (in terms of Ugg boots)? d. Without trade, what is Pakistan’s opportunity cost producing 1 pair of Ugg boots (in terms of pairs of stretchy pants)? For producing stretchy pants (in terms of Ugg boots)?
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e. Which country has a comparative advantage in the production of Ugg boots?
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Unformatted text preview: Explain briefly. f. Which country has a comparative advantage in stretchy pants production? Explain briefly. g. Assume that each country has 100 hours of labor available for production. Depict the production possibilities frontier between Ugg boots and stretchy pants for each country in the graphs below: h. Suppose that under autarky, Australia decides to produce 400 pairs of stretchy pants and 1200 pairs of Ugg boots. Likewise, suppose, again under autarky, that Pakistan decides to produce 600 pairs of stretchy pants and 300 pairs of Ugg boots. Given what we know about which country specializes in which product, state the change in production from the initial levels for each country, that is, calculate who wins and who loses in each country due to free trade relative to the autarky case. Stretchy pants (pairs) Ugg boots (pairs) Stretchy pants (pairs) Ugg boots (pairs) Australia Pakistan...
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Discussion%20Section%20Week1 - Explain briefly. f. Which...

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