ECO364H5 Study Guide - Midterm Guide: Autarky, Consumer Choice, Edgeworth Box
Document Summary
Each question is worth 10 points: assume there are two countries home and foreign, that follow all the usual assumptions of the ricardian model. Home has a labor endowment of 1200 labor hours while foreign has a labor endowment of 2400 labor hours. The following is a table of their respective unit labor requirements for each of the two goods x and y that both countries produce. Assume that both countries consume equal amounts of x and y both before trade (under autarky) and after trade as well. Y: home has a comparative advantage in __y______________ and foreign has a comparative advantage in _______x____________ . The relative price of x in terms of y for. Home is ______1_______ and for foreign is _________1/3 ________. Home: ppf y =240 x, foreign: ppf y = 80 (1/3)x. Under specialization output : {x,y] = {240,240}=1: if the world relative demand of x relative to y is given by the following function:
