Discussion on absolute advantage

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Reference no: EM1375130

CH 20-4
Based on government report, the U.S. can manufacture 3-computers or 3,000 cases of win with one unit of resources, while Germany can manufacture one computer or 5,000 cases of whine with one unit of resources.
a. If this report is accurate, will specialization increase the world output of computers and wine?
b. if the maximum number of computer that can be produced per year in the united states is 1,000, draw the U.S production possibilities curve on a graph.
c. In the diagram, draw the trading possibilities curve if the United States produced only computers and trades them for German whine (at a price for each computer equivalent to 2,000 cases of German wine). Does this curve lie above the production possibilities curve?
d. If the maximum number of case of wine that can be produced per year in Germany is 2 million, draw the German production possibilities curve in a graph.
e. In this diagram, draw the trading possibilities curve if Germany produces only win and trades it for US computers (at a price for each computer equivalent to 2,000 cases of German win). Does this curve lie above the production possibilities curve?

CH 20-10
The Liverous Company is the maker of a new product made and bought only in Japan and the United States. In the United States, the demand curve for this product is such that
QUD = 20 - 2PU
Where PU is the price of the product (in dollars) in the United States, QUD is the quantity demanded (in thousands of units) per week in the United States and QUS is the quantity supplied (in thousands of units) per week in the United States. In Japan, the demand curve for this produce is such that
QJD = 45.5 - 3PJ
Where PJ is the price of the product (in yen) in Japan, QJD is the quantity demanded (in thousands of units) per week in Japan, and Qjs is the quantity supplied (in thousands of units) per week in Japan. Assume that a US dollar exchanges for 130 Japanese yen.
a. What is the price of this product in Japan? In the United States?
b. How much of this product does each country supply?
c. Is the United States and importer or an exporter of this product?

Reference no: EM1375130

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