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1、Chapter31．Homehas1200unitsoflaboravailable.Itcanproducetwogoods,applesandbananas.Theunitlaborrequirementinappleproductionis3,whileinbananaproductionitis2.a．Graphouttheproductionpossibilitiesfrontier:b．Whatistheopportunitycostofapplesintermsofbananas?c．Intheabsenceoftrade,whatwouldthepriceofapp
2、lesintermsofbananasbe?Intheabsenceoftrade,sincelaboristheonlyfactorofproductionandsupplydecisionsaredeterminedbytheattemptsofindividualstomaximizetheirearningsinacompetitiveeconomy,onlywhenwillbothgoodsbeproduced.So2．Homeisasdescribedinproblem1.Thereisnowalsoanothercountry,Foreign,withalaborfo
3、rceof800.Foreign’sunitlaborrequirementinappleproductionis5,whileinbananaproductionitis1.a．GraphForeign’sproductionpossibilitiesfrontier:b．Constructtheworldrelativesupplycurve.3．Nowsupposeworldrelativedemandtakesthefollowingform:Demandforapples/demandforbananas=priceofbananas/priceofapples.a．Gr
4、aphtherelativedemandcurvealongwiththerelativesupplycurve:∵Whenthemarketachievesitsequilibrium,wehave∴RDisahyperbolab．Whatistheequilibriumrelativepriceofapples?TheequilibriumrelativepriceofapplesisdeterminedbytheintersectionoftheRDandRScurves.RD:RS:∴∴c．Describethepatternoftrade.∵∴Inthistwo-coun
5、tryworld,Homewillspecializeintheappleproduction,exportapplesandimportbananas.Foreignwillspecializeinthebananaproduction,exportbananasandimportapples.d．ShowthatbothHomeandForeigngainfromtrade.InternationaltradeallowsHomeandForeigntoconsumeanywherewithinthecoloredlines,whichlieoutsidethecountrie
6、s’productionpossibilityfrontiers.Andtheindirectmethod,specializinginproducingonlyoneproductionthentradewithothercountry,isamoreefficientmethodthandirectproduction.Intheabsenceoftrade,Homecouldgainthreebananasbyforegoingtwoapples,andForeigncouldgainbyoneforegoingfivebananas.Tradeallowseachcount
7、rytotradetwobananasforoneapple.HomecouldthengainfourbananasbyforegoingtwoappleswhileForeigncouldgainoneapplebyforegoingonlytwobananas.SobothHomeandForeigngainfromtrade.4．Supposethatinsteadof1200workers,Homehad2400.Findtheequilibriumrela
