1、7CHAPTER2LABPRODUCTIVITYCOMPARATIVEADVANTAGE:THERICARDIANMODELANSWERSTOTEXTBOOKPROBLEMS1.a.Theproductionpossibilitycurveisastraightlinethatinterceptstheappleaxisat400(12003)thebananaaxisat600(12002).b.Theopptunitycostofa

2、pplesintermsofbananasis32.Ittakesthreeunitsoflabtoharvestanapplebutonlytwounitsoflabtoharvestabanana.Ifonefegoesharvestinganapplethisfreesupthreeunitsoflab.These3unitsoflabcouldthenbeusedtoharvest1.5bananas.c.Labmobility

3、ensuresacommonwageineachsectcompetitionensuresthepriceofgoodsequalstheircostofproduction.Thustherelativepriceequalstherelativecostswhichequalsthewagetimestheunitlabrequirementfapplesdividedbythewagetimestheunitlabrequire

4、mentfbananas.Sincewagesareequalacrosssectsthepriceratioequalstheratiooftheunitlabrequirementwhichis3applesper2bananas.2.a.Theproductionpossibilitycurveislinearwiththeinterceptontheappleaxisequalto160(8005)theinterceptont

5、hebananaaxisequalto800(8001).b.Thewldrelativesupplycurveisconstructedbydeterminingthesupplyofapplesrelativetothesupplyofbananasateachrelativeprice.Thelowestrelativepriceatwhichapplesareharvestedis3applesper2bananas.There

6、lativesupplycurveisflatatthisprice.Themaximumnumberofapplessuppliedatthepriceof32is400suppliedbyHomewhileatthispriceFeignharvests800bananasnoapplesgivingamaximumrelativesupplyatthispriceof12.Thisrelativesupplyholdsfanypr

7、icebetween325.Atthepriceof5bothcountrieswouldharvestapples.Therelativesupplycurveisagainflatat5.Thustherelativesupplycurveisstepshapedflatattheprice32fromtherelativesupplyof0to12verticalattherelativequantity12risingfrom3

8、2to5thenflatagainfrom12toinfinity.3.a.Therelativedemcurveincludesthepoints(155)(122)(11)(212).b.Theequilibriumrelativepriceofapplesisfoundattheintersectionoftherelativedemrelativesupplycurves.Thisisthepoint(122)wherether

9、elative9demonstratesthattheUnitedStateshasanabsoluteadvantageinservicesthisisneitheranecessarynasufficientconditionfdeterminingcomparativeadvantage.Fthisdeterminationtheindustryratiosarealsorequired.Thecompetitiveadvanta

10、geofanyindustrydependsonboththerelativeproductivitiesoftheindustriestherelativewagesacrossindustries.8.WhileJapanesewkersmayearntheequivalentwagesofU.S.wkersthepurchasingpoweroftheirincomeisonethirdless.Thisimpliesthatal

11、thoughw=w(meless)pp(since3p=p).SincetheUnitedStatesisconsiderablymeproductiveinservicesservicepricesarerelativelylow.ThisbenefitsenhancesU.S.purchasingpower.Howevermanyoftheseservicescannotbetransptedhencearenottraded.Th

12、isimpliesthattheJapanesemaynotbenefitfromthelowerU.S.servicescostsdonotfaceaninternationalpricewhichislowerthantheirdomesticprice.LikewisethepriceofservicesinUnitedStatesdoesnotincreasewiththeopeningoftradesincetheseserv

13、icesarenontraded.ConsequentlyU.S.purchasingpowerishigherthanthatofJapanduetoitslowerpricesonnontradedgoods.9.Gainsfromtradestillexistinthepresenceofnontradedgoods.Thegainsfromtradedeclineastheshareofnontradedgoodsincreas

14、es.Inotherwdsthehighertheptionofgoodswhichdonotenterinternationalmarketplacethelowerthepotentialgainsfromtrade.Iftransptcostswerehighenoughsothatnogoodsweretradedthenobviouslytherewouldbenogainsfromtrade.10.Thewldrelativ

15、esupplycurveinthiscaseconsistsofastepfunctionwithasmany“steps“(hizontalptions)astherearecountrieswithdifferentunitlabrequirementratios.Anycountriestotheleftoftheintersectionoftherelativedemrelativesupplycurvesexptthegood