Suppose China and India Are Both Able to Produce Tea

question 224

Essay

Suppose China and India are both able to produce tea and cloth by only using labor.In China,it takes 1 unit of labor to produce 1 kilogram of tea and 2 units of labor to produce 1 meter of cloth.In India,it takes 2 units of labor to produce 1 kilogram of tea and 2 units of labor to produce 1 meter of cloth.
(A)Suppose China has 1,000 units of labor and India has 800 units of labor.Draw the production possibilities curve without trade for each country.
(B)Which country has the absolute advantage in tea production? Which country has a comparative advantage in tea production? Which country has a comparative advantage in cloth production?
(C)In what range would the world trading price ratio lie when these countries open up to free trade?

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Definitions:

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A type of hospital bed that uses air-filled sacs to distribute patient weight, reducing pressure points and aiding in prevention of bedsores.

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Air Mattress/overlay

A type of bedding designed to reduce the risk of bedsores and improve patient comfort by using air chambers that can be adjusted to change pressure distribution.