question archive Suppose there are 1000 workers in a country
Suppose there are 1000 workers in a country
Subject:EconomicsPrice: Bought3
Suppose there are 1000 workers in a country. There are two products that the country produces: A and B. The unit labor requirement for A is 100 and the unit labor requirement for B is 50 .
a. Plot the production possibility frontier.
b. What is the opportunity cost of producing one unit of A in terms of B ?
c. What is the relative price of A to B, PA when there is no trade?
d. Suppose now that the country is suddenly opening to trade. The world relative price of A to B is 4 , or PA/PB= 4. Suppose there is no trade cost. Then how much each goods the country is going to produce after trade?
e. How is the relative price going to change after trade?
f. Is the country better off or worse of after trade as a whole? Why?
