Assume a Ricardian,constant-Cost World

question 8

Essay

Assume a Ricardian,constant-cost world.There are two countries,the United States and Canada.Each country can produce cameras and milk.The table below shows production per man-hour for each country.

The United States has a labor force of 1,000 workers,and Canada has a labor force of 500 workers.
a)Graph the world supply curve for cameras.
b)Show a possible world demand curve and price (assuming that both countries completely specialize).

---

Definitions:

Nonrival

A characteristic of a good whereby one person's consumption does not reduce its availability to others.

Nonexcludable

A characteristic of a good or service that prevents the owner or provider from excluding individuals from using it once it has been provided.

Marginal Private Benefit

The additional benefit received by a consumer or producer from consuming or producing one more unit of a good or service.

Marginal Social Cost

The total cost to society of producing an additional unit of a good, including both the private costs borne by the producer and any external costs inflicted on others.