Comparative Advantage: Suppose that the United States and Switzerland produce bicycles and chocolate bars: Chocolate Bars per worker/year 10,000 20,000 Bicycles per worker/year Switzerland 1 United States a. The United States has an absolute advantage in both bicycles and chocolate bars, but which country has a comparative advantage producing bicycles? Chocolate bars? b. Assume there are 10,000 workers. Draw the production possibilities frontier for the United States prior to trade. Assume the two countries agree to exchange 7,000 chocolate bars per bicycle. Illustrate the effect of specialization and trade on the U.S. production possibilities frontier (put bicycles on the x-axis and millions of chocolate bars on the y-axis). c. Assume there are 10,000 workers. Draw the production possibilities frontier for Switzerland prior to trade. Assume the two countries agree to exchange 7,000 chocolate bars per bicycle. Illustrate the effect of specialization and trade on Switzerland's production possibilities frontier (put bicycles on the x-axis and millions of chocolate bars on the y-axis)

Comparative Advantage: Suppose that the United States and Switzerland produce bicycles and chocolate bars: Chocolate Bars per worker/year 10,000 20,000 Bicycles per worker/year Switzerland 1 United States a. The United States has an absolute advantage in both bicycles and chocolate bars, but which country has a comparative advantage producing bicycles? Chocolate bars? b. Assume there are 10,000 workers. Draw the production possibilities frontier for the United States prior to trade. Assume the two countries agree to exchange 7,000 chocolate bars per bicycle. Illustrate the effect of specialization and trade on the U.S. production possibilities frontier (put bicycles on the x-axis and millions of chocolate bars on the y-axis). c. Assume there are 10,000 workers. Draw the production possibilities frontier for Switzerland prior to trade. Assume the two countries agree to exchange 7,000 chocolate bars per bicycle. Illustrate the effect of specialization and trade on Switzerland's production possibilities frontier (put bicycles on the x-axis and millions of chocolate bars on the y-axis)

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter18: International Trade And Comparative Advantage

Section: Chapter Questions

Problem 2TY

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True or False: The source of comparative advantage must be natural elements like climate and mineral deposits. Explain.
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