question archive 1) Home has 4,800 units of labor

1) Home has 4,800 units of labor

Subject:Computer SciencePrice: Bought3

1) Home has 4,800 units of labor. It can produce two goods, corn and mushrooms. The unit labor requirement in corn production is 6, while in mushroom production is 3. On the other hand, there is also another country, Foreign, with a labor force of 2,400 hours. Foreign's unit labor requirement in corn production is 10, while in mushroom production is 2.

 

a. Draw each country’s PPF on the graph paper provided, and then determine each country’s opportunity cost of corn in terms of mushrooms.

Home’s opportunity cost of corn =

Foreign’s opportunity cost of corn =

 

b. Suppose world relative demand for corn relative to mushrooms takes the following form at any given relative price of corn PC/PM: Demand for corn/demand for mushrooms = (price of mushrooms/price of corn) + (1/10)or the inverse of the relative price of corn in terms of mushrooms plus 0.1. Fill in the following table to derive the world relative demand (RD) schedule for corn:

PC/PM RD = (PM/PC) + 0.1
6  
5  
4  
3  
2  
1  
1/2  

 

c. Construct the world relative supply curve (RS), of corn relative to mushrooms, and graph the world relative demand curve (RD), as derived above, along with the RS on the graph paper provided. Label all axes and curves properly.


d. What is the equilibrium relative price of corn?

 

e. What is the equilibrium relative quantity of corn?

 

f. What is the pattern of trade in the world market given the equilibrium relative price of corn?

pur-new-sol

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