aq10Ap2 - a. The US would export more jeans; NO b....

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Name [ last, first] SS# 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 paid 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.
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: a. The US would export more jeans; NO b. Indonesia would export more jeans; YES c. Indonesia would buy more US cars: YES d. US prices of jeans would rise; NO e. Indonesian prices of cars would fall; YES f. Indonesian prices of cars would rise; NO 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 l. One cannot answer without knowing the $/Rp exchange rate; NO....
View Full Document

Ask a homework question - tutors are online