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1、Chapter31．Homehas1200unitsoflaboravailable.Itcanproducetwogoods,applesandbananas.Theunitlaborrequirementinappleproductionis3,whileinbananaproductionitis2.a．Graphouttheproductionpossibilitiesfrontier:b．Whatistheopportunitycostofapplesintermsofbananas?c．Intheabsenceoftrade,whatwouldthepriceof
2、applesintermsofbananasbe?Intheabsenceoftrade,sincelaboristheonlyfactorofproductionandsupplydecisionsaredeterminedbytheattemptsofindividualstomaximizetheirearningsinacompetitiveeconomy,onlywhenwillbothgoodsbeproduced.So2．Homeisasdescribedinproblem1.Thereisnowalsoanothercountry,Foreign,withal
3、aborforceof800.Foreign’sunitlaborrequirementinappleproductionis5,whileinbananaproductionitis1.a．GraphForeign’sproductionpossibilitiesfrontier:b．Constructtheworldrelativesupplycurve.103．Nowsupposeworldrelativedemandtakesthefollowingform:Demandforapples/demandforbananas=priceofbananas/priceof
4、apples.a．Graphtherelativedemandcurvealongwiththerelativesupplycurve:∵Whenthemarketachievesitsequilibrium,wehave∴RDisahyperbolab．Whatistheequilibriumrelativepriceofapples?TheequilibriumrelativepriceofapplesisdeterminedbytheintersectionoftheRDandRScurves.RD:RS:∴10∴c．Describethepatternoftrade.
5、∵∴Inthistwo-countryworld,Homewillspecializeintheappleproduction,exportapplesandimportbananas.Foreignwillspecializeinthebananaproduction,exportbananasandimportapples.d．ShowthatbothHomeandForeigngainfromtrade.InternationaltradeallowsHomeandForeigntoconsumeanywherewithinthecoloredlines,whichli
6、eoutsidethecountries’productionpossibilityfrontiers.Andtheindirectmethod,specializinginproducingonlyoneproductionthentradewithothercountry,isamoreefficientmethodthandirectproduction.Intheabsenceoftrade,Homecouldgainthreebananasbyforegoingtwoapples,andForeigncouldgainbyoneforegoingfivebanana
7、s.Tradeallowseachcountrytotradetwobananasforoneapple.HomecouldthengainfourbananasbyforegoingtwoappleswhileForeigncouldgainoneapplebyforegoingonlytwobananas.SobothHomeandForeigngainfromtrade.4．Supposethatinsteadof1200workers,Homehad2400.Findtheequilibrium
