The following table shows the output of rice and machinery one labor hour can produce in Mexico and Thailand: Rice Machinery Thailand 6 2 Mexico 2 1 a. What are the marginal products of labor in rice and machinery production in Thailand? What about Mexico? b. Which country has an absolute advantage in rice and which country has an absolute advantage in machinery?
The following table shows the output of rice and machinery one labor hour can produce in Mexico and Thailand:
|
|
Rice |
Machinery |
|
Thailand |
6 |
2 |
|
Mexico |
2 |
1 |
a. What are the marginal products of labor in rice and machinery production in Thailand? What about Mexico?
b. Which country has an
c. What is the autarkic price ratio of machinery relative to rice in each country?
d. Which country has a
e. Suppose Mexico has 1,000 labor hours available. Construct the production-possibility frontier (
f. Suppose the international price is set at 1 machinery:2.5 rice and Mexico decides to completely specialize in producing the product in which it has a comparative advantage. How would the above graph change? Use the graph to show the
g. Discussion: What are the key assumptions of the model that could lead to a discrepancy between the model’s predictions in part f and the empirical evidence?
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