Suppose That a Worker in Taiwan Can Make 2 TVs

question 141

Essay

Suppose that a worker in Taiwan can make 2 TVs or 10 pairs of shoes per week, and a worker in Korea can make 3 TVs or 20 pairs of shoes per week.
a. In what sense do TVs and shoes cost less in Korea than in Taiwan?
b. In what sense do TVs cost less in Taiwan than in Korea?
c. If Taiwan and Korea were to engage in trade, which country would export which good?
d. How would the answer to the question in part c change if a worker in Korea could make 4 TVs per week?

---

Definitions:

Average Rates

The mean amount of a rate, such as interest or tax rate, calculated by totaling several rates and dividing by the number of rates.

Taxable Income

The portion of income that is subject to tax after all deductions and exemptions have been applied according to tax law.

Tax Liability

The total amount of tax that an individual or entity is legally obligated to pay to tax authorities.

Average Tax Rate

The portion of total taxable income that is paid in taxes, calculated by dividing the total tax amount by the total income.