Comparative Advantage

1. Problem

Firms in Home produce rug and banana by using a technology that can be characterized by the following production functions:

Qrug= 10.02·Lrug

Q_banana= 6.26·L_banana

The production functions in the rest of the world take the following form:

Q^world_rug = 2.31·L^world_rug Q^world_banana= 6.44·L^world_banana

Which economy has comparative advantage in producing banana?

Solution: The rest of the world has comparative advantage in producing banana.

2. Problem

The world consists of two economies A and B. Both economies produce only two goods and they use a technology in all of the sectors that can be characterized by a linear production function. The following table displays the parameters that show the amount of output that can be produced by using just one unit of labor (total productivity).

Total productivity

Economy A Economy B

hot dog 11.38 11.60

blackcurrant 1.39 5.97

Which economy has comparative advantage in producing hot dog?

2.

Solution: Economy A has comparative advantage in producing hot dog.

3. Problem

Firms in Home produce pushchair and mint tea by using a technology that can be characterized by the following production functions:

Qpushchair= 0.90·Lpushchair

Q_{mint tea}= 10.63·L_{mint tea} The production functions in the rest of the world take the following form:

Q^world_pushchair= 2.93·L^world_pushchair Q^world_{mint tea}= 0.49·L^world_{mint tea}

Which economy has comparative advantage in producing mint tea?

Solution: Home has comparative advantage in producing mint tea.

4. Problem

The following table shows the unit labor requirement parameters in an open economy and in the rest of the world. Both regions produce only two goods and use technology that requires only input as a factor.

unit labor requirement

Open economy Rest of the World

coffee cup 1.71 5.48

painting 8.24 4.70

Which economy has comparative advantage in producing coffee cup?

Solution: The open economy has comparative advantage in producing coffee cup.

2.

5. Problem

A small open economy produces its goods by using a technology that can be described by the following production functions

Qchicken burger= 8.06·Lchicken burger

Q_peach= 10.66·L_peach

In the rest of the world the relative price of chicken burger in terms of peach is 21.22.

Which economy has comparative advantage in producing peach?

Solution: The rest of the world has comparative advantage in producing peach.

6. Problem

The following table shows the unit labor requirement parameters in an open economy and in the rest of the world. Both regions produce only two goods and use technology that requires only input as a factor.

unit labor requirement

Open economy Rest of the World

bagel 5.89 5.18

lemon 7.35 7.03

Which economy has comparative advantage in producing bagel?

Solution: The rest of the world has comparative advantage in producing bagel.

7. Problem

The world consists of two economies A and B. Both economies produce only two goods and they use a technology in all of the sectors that can be characterized by a linear production function. The following table displays the parameters that show the amount of output that can be produced by using just one unit of labor (total productivity).

2.

Total productivity

Economy A Economy B

porridge 11.64 10.16

lime 4.68 8.93

Which economy has comparative advantage in producing porridge?

Solution: Economy A has comparative advantage in producing porridge.

8. Problem

The production possibilities frontier function in a small open economy is given by Qsalad= 205.65−12.36·Qchicken burger

In the rest of the world the relative price of chicken burger in terms of salad is 32.69.

Which economy has comparative advantage in producing salad?

Solution: The rest of the world has comparative advantage in producing salad.

9. Problem

The following table shows the unit labor requirement parameters in an open economy and in the rest of the world. Both regions produce only two goods and use technology that requires only input as a factor.

unit labor requirement

Open economy Rest of the World

fruit cake 6.90 0.86

handbag 5.49 10.73

Which economy has comparative advantage in producing handbag?

2.

Solution: The open economy has comparative advantage in producing handbag.

10. Problem

The production possibilities frontier in country A and country B take the following form:

Q^A_cabbage= 105.29−27.67·Q^A_{ice cream} Q^B_cabbage= 391.08−35.23·Q^B_{ice cream}

Identify the good in which country A has a comparative advantage.

Solution: A has comparative advantage in producing ice cream.

11. Problem

In a small open economy the opportunity cost of producing pie in terms of almond is 33.17. In the rest of the world the relative price of pie in terms of almond is _P^Ppieworld^world

almond = 38.45.

In producing which good has the rest of the world comparative advantage?

Solution: The rest of the world has comparative advantage in producing almond.

12. Problem

Firms in Home produce jigsaw and trifle by using a technology that can be characterized by the following production functions:

Qjigsaw= 2.23·Ljigsaw

Qtrifle= 11.17·Ltrifle

The production functions in the rest of the world take the following form:

Q^world_jigsaw= 7.12·L^world_jigsaw Q^world_trifle = 3.59·L^world_trifle Which economy has comparative advantage in producing trifle?

Solution: Home has comparative advantage in producing trifle.

2.

13. Problem

The world consists of two economies A and B. Both economies produce only two goods and they use a technology in all of the sectors that can be characterized by a linear production function. The following table displays the parameters that show the amount of output that can be produced by using just one unit of labor (total productivity).

Total productivity

Economy A Economy B

teacup 2.09 4.12

sweetcorn 1.32 7.08

Which economy has comparative advantage in producing sweetcorn?

Solution: Economy B has comparative advantage in producing sweetcorn.

14. Problem

The world consists of two economies A and B. Both economies produce only two goods and they use a technology in all of the sectors that can be characterized by a linear production function. The following table displays the parameters that show the amount of output that can be produced by using just one unit of labor (total productivity).

Total productivity

Economy A Economy B

jigsaw 1.58 8.92

shampoo 6.68 11.60

Which economy has comparative advantage in producing shampoo?

Solution: Economy A has comparative advantage in producing shampoo.

2.

15. Problem

In a small open economy the opportunity cost of producing bookshelf in terms of painting is 36.93. In the rest of the world the relative price of bookshelf in terms of painting is ^P_P^{bookshelfworld}world

painting = 27.67.

Identify the good in which the small open economy has comparative advantage over the rest of the world.

Solution: The small open economy has comparative advantage in producing painting.

16. Problem

In economy A the production possibilities frontier function intersects the chicken burger axis at 10.49 and the aubergine axis at 2.56.In country B the relative price of chicken burger in terms of aubergine is

Pchicken burger^B

Pchicken burger^B = 8.38.

In producing which good has country A comparative advantage?

Solution: A has comparative advantage in producing chicken burger.

17. Problem

In Home it takes 0.19 units of labor to produce one unit of backpack and the unit labor requirement parameter in the hairdryer sector isahairdryer= 9.90. In Foreign the relative price of backpack in terms of hairdryer is ^P

Foreign backpack

P_hairdryer^Foreign = 6.57.

In producing which good has Foreign comparative advantage?

Solution: Foreign has comparative advantage in producing hairdryer.

18. Problem

In economy A the production possibilities frontier function intersects the platform shoe axis at 32.10 and the tea axis at 33.93.In country B the relative price of platform shoe in terms of tea is ^Pplatform shoe^B

Pplatform shoe^B = 6.13.

In producing which good has country A comparative advantage?

2.

Solution: A has comparative advantage in producing platform shoe.

19. Problem

In a small open economy the opportunity cost of producing pastry in terms of rug is 22.24. In the rest of the world the relative price of pastry in terms of rug is ^P_P^pastryworldworld

rug = 35.23.

Identify the good in which the small open economy has comparative advantage over the rest of the world.

Solution: The small open economy has comparative advantage in producing pastry.

20. Problem

In economy A the production possibilities frontier function intersects the cauliflower axis at 6.91 and the onion axis at 3.92.In country B the relative price of cauliflower in terms of onion is ^P_P^{cauliflowerB}B

cauliflower = 2.68.

In producing which good has country B comparative advantage?

Solution: B has comparative advantage in producing onion.

21. Problem

The production possibilities frontier in country A and country B take the following form:

Q^A_onion= 244.08−2.66·Q^A_{paper clip} Q^B_onion= 333.35−21.24·Q^B_{paper clip}

Identify the good in which country A has a comparative advantage.

Solution: A has comparative advantage in producing paper clip.

22. Problem

The world consists of two economies A and B. Both economies produce only two goods and they use a technology in all of the sectors that can be characterized by a linear production function. The following

2.

table displays the parameters that show the amount of output that can be produced by using just one unit of labor (total productivity).

Total productivity

Economy A Economy B

tea 6.04 9.88

bookshelf 8.34 5.14

Which economy has comparative advantage in producing bookshelf?

Solution: Economy A has comparative advantage in producing bookshelf.

23. Problem

In Home it takes 3.05 units of labor to produce one unit of salad and the unit labor requirement parameter in the handbag sector is ahandbag = 5.55. In Foreign the relative price of salad in terms of handbag is

P_salad^Foreign

P_handbag^Foreign = 33.42.

In producing which good has Foreign comparative advantage?

Solution: Foreign has comparative advantage in producing handbag.

24. Problem

In Home it takes 7.61 units of labor to produce one unit of lemon and the unit labor requirement parameter in the chicken burger sector isachicken burger= 3.66. In Foreign the relative price of lemon in terms of chicken burger is ^{PlemonForeign}

Pchicken burger^Foreign

= 36.80.

In producing which good has Foreign comparative advantage?

Solution: Foreign has comparative advantage in producing chicken burger.

2.

25. Problem

The world consists of two economies A and B. Both economies produce only two goods and they use a technology in all of the sectors that can be characterized by a linear production function. The following table displays the parameters that show the amount of output that can be produced by using just one unit of labor (total productivity).

Total productivity

Economy A Economy B

almond 0.30 10.06

platform shoe 5.98 11.53

Which economy has comparative advantage in producing platform shoe?

Solution: Economy A has comparative advantage in producing platform shoe.

26. Problem

The production possibilities frontier in country A and country B take the following form:

Q^Ablackcurrant= 301.04−38.66·Q^A_almond Q^Bblackcurrant= 255.10−20.55·Q^B_almond

In producing which good has country B comparative advantage?

Solution: B has comparative advantage in producing almond.

27. Problem

Firms in Home produce porridge and spring onion by using a technology that can be characterized by the following production functions:

Q_porridge= 8.60·L_porridge Qspring onion= 3.78·Lspring onion

2.

The production functions in the rest of the world take the following form:

Q^world_porridge= 2.02·L^world_porridge Q^worldspring onion= 10.70·L^worldspring onion

Which economy has comparative advantage in producing porridge?

Solution: Home has comparative advantage in producing porridge.

28. Problem

Firms in Home produce hot chocolate and painting by using a technology that can be characterized by the following production functions:

Qhot chocolate= 5.25·Lhot chocolate

Qpainting= 5.95·Lpainting

The production functions in the rest of the world take the following form:

Q^worldhot chocolate= 9.62·L^worldhot chocolate

Q^world_painting= 4.62·L^world_painting

Which economy has comparative advantage in producing hot chocolate?

Solution: The rest of the world has comparative advantage in producing hot chocolate.

29. Problem

A small open economy produces its goods by using a technology that can be described by the following production functions

Qwatch= 3.72·Lwatch

Q_pizza= 7.22·L_pizza

In the rest of the world the relative price of watch in terms of pizza is 9.85.

Which economy has comparative advantage in producing watch?

Solution: The small open economy has comparative advantage in producing watch.

2.

30. Problem

In an economy the relative price of lime in terms of hairspray would have been 0.82 in autarky. The same relative price in the rest of the world is 37.35.

Which economy has comparative advantage in producing hairspray?

Solution: The rest of the world has comparative advantage in producing hairspray.

31. Problem

The production possibilities frontier function in a small open economy is given by Qhairspray= 157.58−33.53·Qhairdryer

In the rest of the world the relative price of hairdryer in terms of hairspray is 29.49.

Which economy has comparative advantage in producing hairdryer?

Solution: The rest of the world has comparative advantage in producing hairdryer.

32. Problem

A small open economy produces its goods by using a technology that can be described by the following production functions

Qteacup= 6.93·Lteacup

Qporridge= 2.97·Lporridge

In the rest of the world the relative price of teacup in terms of porridge is 1.60.

Which economy has comparative advantage in producing teacup?

Solution: The small open economy has comparative advantage in producing teacup.

33. Problem

In economy A the production possibilities frontier function intersects the watermelon axis at 11.93 and the teacup axis at 14.97.In country B the relative price of watermelon in terms of teacup is ^P_P^watermelonBB

watermelon = 10.17.

2.

In producing which good has country B comparative advantage?

Solution: B has comparative advantage in producing teacup.

34. Problem

The production possibilities frontier in country A and country B take the following form:

Q^A_tea= 282.57−5.50·Q^A_cauliflower Q^B_tea= 299.00−24.92·Q^B_cauliflower

Identify the good in which country A has a comparative advantage.

Solution: A has comparative advantage in producing cauliflower.

35. Problem

Firms in Home produce onion and watch by using a technology that can be characterized by the following production functions:

Qonion= 4.72·Lonion

Q_watch= 11.31·L_watch

The production functions in the rest of the world take the following form:

Q^world_onion= 0.43·L^world_onion Q^world_watch= 6.69·L^world_watch

Which economy has comparative advantage in producing onion?

Solution: Home has comparative advantage in producing onion.

36. Problem

In an economy the relative price of salad in terms of mint tea would have been 24.07 in autarky. The same relative price in the rest of the world is 25.28.

2.

Which economy has comparative advantage in producing mint tea?

Solution: The rest of the world has comparative advantage in producing mint tea.

37. Problem

In Home it takes 10.95 units of labor to produce one unit of cola and the unit labor requirement parameter in the soup sector isasoup= 2.28. In Foreign the relative price of cola in terms of soup is ^PcolaForeign

Psoup^Foreign = 4.98.

In producing which good has Foreign comparative advantage?

Solution: Foreign has comparative advantage in producing soup.

38. Problem

In economy A the production possibilities frontier function intersects the bagel axis at 23.43 and the coffee cup axis at 4.65.In country B the relative price of bagel in terms of coffee cup is ^P_P^bagelBB

bagel = 13.63.

In producing which good has country A comparative advantage?

Solution: A has comparative advantage in producing bagel.

39. Problem

The following table shows the unit labor requirement parameters in an open economy and in the rest of the world. Both regions produce only two goods and use technology that requires only input as a factor.

unit labor requirement

Open economy Rest of the World

pistachio 5.18 3.79

watermelon 0.96 9.73

2.

Which economy has comparative advantage in producing watermelon?

Solution: The open economy has comparative advantage in producing watermelon.

40. Problem

The production possibilities frontier function in a small open economy is given by Qsweetcorn= 291.86−12.66·Qtea

In the rest of the world the relative price of tea in terms of sweetcorn is 19.79.

Which economy has comparative advantage in producing sweetcorn?

Solution: The rest of the world has comparative advantage in producing sweetcorn.

41. Problem

The production possibilities frontier function in a small open economy is given by Qshampoo= 254.23−28.54·Qspring onion

In the rest of the world the relative price of spring onion in terms of shampoo is 8.67.

Which economy has comparative advantage in producing spring onion?

Solution: The rest of the world has comparative advantage in producing spring onion.

42. Problem

The production possibilities frontier function in a small open economy is given by Qspring onion= 280.71−22.76·Qhot chocolate

In the rest of the world the relative price of hot chocolate in terms of spring onion is 35.99.

Which economy has comparative advantage in producing hot chocolate?

Solution: The small open economy has comparative advantage in producing hot chocolate.

2.

43. Problem

In economy A the production possibilities frontier function intersects the bagel axis at 6.79 and the water-melon axis at 32.14.In country B the relative price of bagel in terms of waterwater-melon is ^P_P^bagelBB

bagel = 3.28.

In producing which good has country B comparative advantage?

Solution: B has comparative advantage in producing bagel.

44. Problem

In a small open economy the opportunity cost of producing aubergine in terms of backpack is 0.37. In the rest of the world the relative price of aubergine in terms of backpack is ^P_P^{aubergineworld}world

backpack = 32.66.

In producing which good has the rest of the world comparative advantage?

Solution: The rest of the world has comparative advantage in producing backpack.

45. Problem

In economy A the production possibilities frontier function intersects the backpack axis at 35.94 and the chicken burger axis at 28.30.In country B the relative price of backpack in terms of chicken burger is

P_backpack^B

P_backpack^B = 6.26.

In producing which good has country B comparative advantage?

Solution: B has comparative advantage in producing chicken burger.

46. Problem

The following table shows the unit labor requirement parameters in an open economy and in the rest of the world. Both regions produce only two goods and use technology that requires only input as a factor.

2.

unit labor requirement

Open economy Rest of the World

scarf 3.47 2.88

tomato 9.79 4.50

Which economy has comparative advantage in producing tomato?

Solution: The rest of the world has comparative advantage in producing tomato.

47. Problem

The production possibilities frontier in country A and country B take the following form:

Q^A_orange= 299.16−23.05·Q^Afood processor

Q^B_orange= 369.46−24.75·Q^Bfood processor

In producing which good has country B comparative advantage?

Solution: B has comparative advantage in producing orange.

48. Problem

The world consists of two economies A and B. Both economies produce only two goods and they use a technology in all of the sectors that can be characterized by a linear production function. The following table displays the parameters that show the amount of output that can be produced by using just one unit of labor (total productivity).

Total productivity

Economy A Economy B

pistachio 5.28 4.33

spring onion 1.40 7.49

2.

Which economy has comparative advantage in producing pistachio?

Solution: Economy A has comparative advantage in producing pistachio.

49. Problem

In economy A the production possibilities frontier function intersects the milkshake axis at 18.76 and the scarf axis at 1.14.In country B the relative price of milkshake in terms of scarf is ^P_P^milkshakeBB

milkshake = 10.51.

In producing which good has country A comparative advantage?

Solution: A has comparative advantage in producing milkshake.

50. Problem

The world consists of two economies A and B. Both economies produce only two goods and they use a technology in all of the sectors that can be characterized by a linear production function. The following table displays the parameters that show the amount of output that can be produced by using just one unit of labor (total productivity).

Total productivity

Economy A Economy B

brioche 6.91 4.36

hot chocolate 3.41 8.71

Which economy has comparative advantage in producing hot chocolate?

Solution: Economy B has comparative advantage in producing hot chocolate.

51. Problem

In an economy the relative price of brioche in terms of wallet would have been 3.32 in autarky. The same relative price in the rest of the world is 22.16.

2.

Which economy has comparative advantage in producing brioche?

Solution: The observed economy has comparative advantage in producing brioche.

52. Problem

In an economy the relative price of tea in terms of wooden spoon would have been 30.88 in autarky. The

In an economy the relative price of tea in terms of wooden spoon would have been 30.88 in autarky. The

In document International Trade. Numerical and Geometric Problems (Pldal 149-185)