aq10Ap1 - a. The US would import more jeans; YES b....

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10 April In the US, the wholesale price of a good pair of jeans is about $12, of a small car about $15,000. In Indonesia, the wholesale price of a good pair of jeans is about Rp 60,000, of a small car about Rp 180 million. If the US did not have barriers to the import of jeans, and Indonesia did not have barriers to the import of cars, In US, opportunity cost of a car is 15,000/12 = 1,250 pairs of jeans. In Indonesia, opportunity cost of a car is 180 million/60,000 = 3,000 pairs of jeans. So the US has comparative advantage in cars, Indonesia in jeans.
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Unformatted text preview: a. The US would import more jeans; YES b. Indonesia would export more jeans; YES c. Indonesia would buy more US cars; YES d. US prices of jeans would rise; NO, they would fall. e. US prices of jeans would fall; YES f. Indonesian prices of cars would fall; YES g. Some US jeans-making factories would close; YES h. Indonesia would make more cars; NO i. US car prices might rise; YES j. There would be more employment in jeans-making in Indonesia; YES k. Comparative advantage would change; NO...
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This note was uploaded on 05/22/2011 for the course ECO 2013 taught by Professor Denslow during the Spring '05 term at University of Florida.

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