The Crazies

Problem 3.8. Vintland and Moonited Republic Table of Activity Requirements: fuddle discontinue Vintland 15 10 M.Rep. 10 4 a. Moonited Republic has an commanding receipts in both goods -- it can ready both fuddle and lay off with lower undertaking inputs. b. Opportunity make up calculations: In Vintland: To produce an extra nursing feeding bottle of drink, you bespeak 15 hours of labor. This means taking 15 hours of labor onward from lay off, and since 10 hours is essentialed for each kg of cheese, this means natural endowment 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. high mallow = 1/10 Labor. If all 30 million workers in Vintland were in high mallow, Cheese production wourl be 3 million. In MR, the production functio! ns are Wine = 1/10 Labor, for 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: figure 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 valuable as cheese] Since...If you want to get a unspoilt essay, value it on our website: BestEssayCheap.com

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