Ch16_SSol - assume that China and France each have 1000...

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Problem 16.1 Production and consumption What is the production and consumption of China and France without trade? Toys Wine Assumptions (containers/unit) (cases/unit) China -- output per unit of production input 10.0 7.0 France -- output per unit of production input 2.0 7.0 China -- total production inputs 1,000.0 France -- total production inputs 1,000.0 Production if there is no trade Toys Wine CHINA Allocated production units to 800 200 Produces and consumes (output per unit x units allocated) 8,000 1,400 FRANCE Allocated production units to 200 800 Produces and consumes (output per unit x units allocated) 400 5,600 Total production and consumption across both countries 8,400 7,000 Comparative Advantage. Problems 1 - 5 illustrate an example of trade induced by comparative advantage. They
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Unformatted text preview: assume that China and France each have 1000 production units. With one unit of production (a mix of land, labor, capital and technology), China can produce either 10 containers of toys or 7 cases of wine. France can produce either 2 cases of toys or 7 cases of wine. Thus, a production unit in China is five times as efficient compared to France when producing toys, but equally efficient when producing wine. Assume at first that no trade takes place. China allocates 800 production units to building toys and 200 production units to producing wine. France allocates 200 production units to building toys and 800 production units to producing wine....
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This note was uploaded on 07/27/2011 for the course ECON 101 taught by Professor Dr. during the Spring '11 term at Columbia Union.

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