The countries of Libya and Egypt are small neighbor countries in the Africa continent. Both produce fruit and timber. Assume that each country has a labor force of 1200. The following table gives production per month for each worker in each country. BASKETS OF FRUIT BOARD FEET OF TIMBER Libyan workers Egyptian workers 10 5 30 10 Note: Productivity of one worker for one month. a. Which country has an absolute advantage in the production of fruit? Which country has an absolute advantage in the production of timber? b. Which country has a comparative advantage in the production of fruit? of timber? c. Sketch the PPF's for both countries. d. Assuming no trading between the two, if both countries wanted to have equal numbers of feet of timber and baskets of fruit, how would they allocate workers to the two sectors? e. Show that specialization and trade can move both countries beyond their PPF's.

The countries of Libya and Egypt are small neighbor countries in the Africa continent. Both produce fruit and timber. Assume that each country has a labor force of 1200. The following table gives production per month for each worker in each country. BASKETS OF FRUIT BOARD FEET OF TIMBER Libyan workers Egyptian workers 10 5 30 10 Note: Productivity of one worker for one month. a. Which country has an absolute advantage in the production of fruit? Which country has an absolute advantage in the production of timber? b. Which country has a comparative advantage in the production of fruit? of timber? c. Sketch the PPF's for both countries. d. Assuming no trading between the two, if both countries wanted to have equal numbers of feet of timber and baskets of fruit, how would they allocate workers to the two sectors? e. Show that specialization and trade can move both countries beyond their PPF's.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter18: International Trade And Comparative Advantage

Section: Chapter Questions

Problem 2TY

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