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  • Problem 1: The Following Cost Data Is For The Mystical Land Called Painduvin, A

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    Lee's World
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    This document contains information about the production of bread and wine in the mythical land of Painduvin, including the capital and labor inputs required for each good. It also poses four questions: 1) Bread requires more labor input while wine requires more capital input. 2) Painduvin has a comparative advantage in the production of wine. 3) The opening of free trade would cause the relative price of bread to decrease. 4) With free mobility of capital and labor, capital owners in Painduvin would gain from trade while workers would lose. It also provides wage and interest rate data for two countries, Country A and B, as well as labor and capital requirements for goods X

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    Homework for Week 5

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    This document contains information about the production of bread and wine in the mythical land of Painduvin, including the capital and labor inputs required for each good. It also poses four questions: 1) Bread requires more labor input while wine requires more capital input. 2) Painduvin has a comparative advantage in the production of wine. 3) The opening of free trade would cause the relative price of bread to decrease. 4) With free mobility of capital and labor, capital owners in Painduvin would gain from trade while workers would lose. It also provides wage and interest rate data for two countries, Country A and B, as well as labor and capital requirements for goods X

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    6 views1 page

    Problem 1: The Following Cost Data Is For The Mystical Land Called Painduvin, A

    Uploaded by

    Lee's World
    This document contains information about the production of bread and wine in the mythical land of Painduvin, including the capital and labor inputs required for each good. It also poses four questions: 1) Bread requires more labor input while wine requires more capital input. 2) Painduvin has a comparative advantage in the production of wine. 3) The opening of free trade would cause the relative price of bread to decrease. 4) With free mobility of capital and labor, capital owners in Painduvin would gain from trade while workers would lose. It also provides wage and interest rate data for two countries, Country A and B, as well as labor and capital requirements for goods X

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 1

    Problem 1: The following cost data is for the mystical land called Painduvin, a

    capital-abundant land where they produce nothing but bread and wine using only
    capital and labor as inputs:

    1 unit of Bread 1 unit of Wine


    Capital Input 5 euros 20 euros
    Labor Input 4 euros 10 euros

    1. Based on the information above, bread is __________ intensive and wine is


    __________ intensive?

    2. Painduvin has a comparative advantage in the production of which commodity?

    3. How would the opening up of free trade cause the relative price of bread to change?

    4. If capital and labor were completely mobile within Painduvin, who* in Painduvin
    would gain and who in Painduvin would lose from going from a situation of no trade
    to a situation of free trade?
    (*capital owners or workers)

    Problem 2: The table below gives data for wage rate and interest rate of 2 countries:
    A and B. These countries produce only 2 products: X and Y with the amount of labour
    input and capital input as below:

    Country A Country B X Y
    Wage rate (USD/h) 4 2 Labour input (worker) 1 2
    Interest rate 15 4 Capital (thousand 5 6
    (%/year) USD)

    What is the pattern of international trade?

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