mathsperts8 - Mathspert VII - Comparative Advantage. Amy...

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Mathspert VII - Comparative Advantage. Amy and Bob each have an allotment and grow only two crops: potatoes of her allotment to growing potatoes, her yield is 2 potatoes and 1- ± his yield is 1.5 ± potatoes and 2(1- ± ) y U = xy: Bob, surprisingly, has the same preferences. (i) Autarky: suppose Amy eats x = 2 potatoes and grows y = 1 and so obtains utility U = 2 (1 ) : Show her utility maximising choice is = 1 = 2; utility U A = 1 = 2 : Repeat the argument for Bob and show he chooses ± = 1 = 2; i.e. Bob grows U B = 3 = 4 : (ii) Market Trade: suppose a market is set up where potatoes trade at price p
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This note was uploaded on 12/31/2011 for the course ECON MR 102 taught by Professor Huyduong during the Winter '11 term at RMIT Vietnam.

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