The Crazies

Problem 3.8. Vintland and Moonited Republic Table of Activity Requirements: vino give up Vintland 15 10 M.Rep. 10 4 a. Moonited Republic has an inviolable receipts in two goods -- it can ready both wine-colored and lay off with lower undertaking inputs. b. Opportunity represent calculations: In Vintland: To produce an extra nursing feeding bottle of wine, you lack 15 hours of labor. This means taking 15 hours of labor outdoor(a) from cheese, and since 10 hours is impoverishmented for each kg of cheese, this means large-minded up 1.5 kilos of cheese. Hence in Vintland the OC of a bottle of wine is 1.5 kilograms of cheese. In Moonited Republic, to produce 1 bottle of wine you need 10 hours of labor, and to get the 10 hours of labor by transferring workers from the cheese industry, you must give up 2.5 kilos of cheese. In Moonited Republic, the OC of a bottle of wine is 2.5 kilograms of cheese. Hence, Vintland is the low opportunity cost maker o f wine and has the comparative advantage in cheese. Calculate the OC of producing another(prenominal) kilo of cheese: you will find it as 2/3 of a bottle of wine in Vintland, and as four-tenths of a bottle of wine in MR. Since 0.67 > 0.4, Vintland is the high opportunity cost maker of cheese, and MR has the comparative advantage in cheese. c.

PPFs: Write the drudgery functions for Vintland: Wine = 1/15 Labor. If all 30 cardinal workers in Vintland were in Wine, Wine production would be 2 million. lay off = 1/10 Labor. If all 30 million workers in Vintland were in high mallow, Cheese production wourl be 3 million. In MR, the p roduction functions are Wine = 1/10 Labor, f! or a maximum of 2 million (the same as Vintland) and Cheese = 1/4 Labor, so that maximum production = 1/4 (20 million) or 5 million. d. Autarky cost ratios: gauge Vintland wages are $ 2, so that Pw = $ 30 and Pc = $ 20. Pw / Pc = 1.5 Suppose MR wages are € 5, so that Pw = € 50 and Pc = € 20. Pw / Pc = 2.5 The text assumes that Pw / Pc = 2.0 [wine is twice as overpriced as cheese] Since...If you want to get a unspoilt essay, instal it on our website: BestEssayCheap.com

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