Suppose China and India Are Both Able to Produce Tea

question 183

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,DdD urits af labar and India has odd urits oflabar. Draw the production possibilities curve writhaut tade far each caunty.
(B) Which cauntry has the absalute advantage in tea production? Which cauntry has a camparatye advantage in tea protuction? Which cauntry has a comparative advantage in clath protuction?
(C) In what range wauld the warld trahing price ratio lie when these cauntries open up to Fretrade?

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