Homework Sourseb Suppose that Canada is currently producing and consuming 3
b. Suppose that Canada is currently producing (and consuming) 30 million tonnes of pulp and paper, and 15 million tonnes of computer parts, while the United states is currently producing (and consuming) 10 million tonnes of pulp and paper and 160 million tonnes of computer parts. Demonstrate that Canada and the United States can both be better off if they specialize in producing only one good and engage in trade.
c. Illustrate your answer to question (b) by drawing a PPF for Canada and a PPF for United States. Show on your PPFs the combinations of pulp and paper and computer parts produced and consumed in each country before and after trade.
it Chrome File Edit View History Bookmarks People Window Help 9 t a D A 50% , Mon 1:43 AM Q IE 0 0 0 https://connect.ubcca/b x outlook.com C Home | Chegg .com C Ex https: //connect.ubc.ca /bbcswebdav/pid-3318286-dt-content-rid-15157558_1/courses/SIS.UBCO.ECON.355.002.2015W2.63414/Problem%20Set%201-Econ%20355.pdf Problem 1 4. Suppose Canada and the United States both produce paper and pulp(in milion tonnes) and computer products (in million tonnes). The table below shows the combination of goods that each country produce in one day. Canada United States Pulp and Paper Computer Parts | Pulp and Paper Computer Parts 200 10 4510 160 120 a. Who has the comparative advantage in producing pulp and paper? Who has the comparative advantage in producing computer parts? b. Suppose that Canada is currently producing (and consuming ) 30 million tonnes of pulp and paper, and 15 million tonnes of computer parts, while the United states is currently producing (and consuming) 10 million tonnes of pulp and paper and 160 million tonnes of computer parts. Demonstrate that Canada and the United States can both be better off if they specialize in producing only one good and engage in trade. c. Illustrate your answer to question (b) by drawing a PPF for Canada and a PPF for United States. Show on your PPFs the combinations of pulp and paper and computer parts produced and consumed in each country before and after trade . 5. Recently, computer programmers in developing countries such as India have began doing work formerly done in the USA. This shift has led to the substan. tial pay cuts for some programmers in the united states. Answer the following questions: a. How is this possible, when the wages of skilled labor are rising in the USASolution
(a)The table in ( a ) contains information on the production of Pulp and Paper and Computer parts that each country can produce given that it allocates its entire resources in the production of one product.
Pulp and Paper
Computer parts
Canada
40
60
US
50
200
Table (a)
Based on this, we calculate the opportunity cost table for each country for each of the two products to decide upon which country has comparative advantage in production of goods.
Pulp and Paper
Computer parts
Canada
1.5
0.7
US
4
0.3
The values in the above table has been calculated using the formula, for eg,
Opportunity cost of Pulp and Paper in Canada = Units of Computer parts produced/Units of Pulp and paper produced in a day
Clearly, Canada has lesser opportunity cost to produce Pulp and Paper (1.5<4) and thus has comparative advantage in the same and US has to give upon lesser units for computer parts (0.3<0.7) and thus has comparative advantage in the production of Computer parts.
Pulp and Paper
Computer parts
Canada
30
15
US
10
160
In order to demonstrate that US and Canada can specialise and produce one good and engage in trade and still benefit, we will again use the concept of comparative advantage as above and construct opportunity cost table.
Pulp and Paper
Computer parts
Canada
0.5
2.0
US
16
0.06
Again, we can see that Canada has lesser opportunity cost to produce Pulp and Paper (0.5<16) and thus has comparative advantage in the same and US has to give upon lesser units for computer parts (0.1<2) and thus has comparative advantage in the production of Computer parts. Thus, Canada and US should specialise in production of Pulp & Paper and Computer parts respectively and should trade.
(C) For this part, please refer the attachment “Part C answer”.
(a)The table in ( a ) contains information on the production of Pulp and Paper and Computer parts that each country can produce given that it allocates its entire resources in the production of one product.
Pulp and Paper
Computer parts
Canada
40
60
US
50
200
Table (a)
Based on this, we calculate the opportunity cost table for each country for each of the two products to decide upon which country has comparative advantage in production of goods.
Pulp and Paper
Computer parts
Canada
1.5
0.7
US
4
0.3
The values in the above table has been calculated using the formula, for eg,
Opportunity cost of Pulp and Paper in Canada = Units of Computer parts produced/Units of Pulp and paper produced in a day
Clearly, Canada has lesser opportunity cost to produce Pulp and Paper (1.5<4) and thus has comparative advantage in the same and US has to give upon lesser units for computer parts (0.3<0.7) and thus has comparative advantage in the production of Computer parts.
Pulp and Paper
Computer parts
Canada
30
15
US
10
160
In order to demonstrate that US and Canada can specialise and produce one good and engage in trade and still benefit, we will again use the concept of comparative advantage as above and construct opportunity cost table.
Pulp and Paper
Computer parts
Canada
0.5
2.0
US
16
0.06
Again, we can see that Canada has lesser opportunity cost to produce Pulp and Paper (0.5<16) and thus has comparative advantage in the same and US has to give upon lesser units for computer parts (0.1<2) and thus has comparative advantage in the production of Computer parts. Thus, Canada and US should specialise in production of Pulp & Paper and Computer parts respectively and should trade.
(C) For this part, please refer the attachment “Part C answer”.
| Pulp and Paper | Computer parts | |
| Canada | 40 | 60 |
| US | 50 | 200 |
