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consider a world of two countries

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consider a world of two countries, France and Germany. each country has 200 units of labor, the only input. In france, it takes 5 units of labor to produce a unit of beer and 4 units of labor to produce a unit of wine. In Germany, it takes 4 units of labor to produce one unit of beer and 8 units of labor to produce one unit of wine.;a) write down and draw the PPF equation for each country.;b) what is the opportunity cost of producing one unit of beer in france? and in germany?;c)which country has absolute advantage in which good and why? which country has a comparative advantage and why?;d) if Free trade were allowed between the two countries, how much of each good would be produced? Illustrate free trade equilibrium, indicating consumption, production, exports and imports. What is the effect of trade on welfare on each country?

 

Paper#31468 | Written in 18-Jul-2015

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