1. Consider a Ricardian model of comparative advantage. There are two countries, the U.S.

and
China. Each country can produce two goods, shirts(S) and food (F). Assume the US has 10000
workers and China has 5000 workers. Labor productivity in each country is:
Labor Productivity by Country and GoodUnited States
Shirts 10 shirts/day Food 30 bushels/day

China
Shirts 6 shirts/day Food 2 bushels/day

a)Which country has the absolute advantage in shirts?; in food? Explain.

b) What is the opportunity cost of producing food in the U.S.?; in China? What is the opportunity
cost of producing shirts in the U.S.?; in India? Comparative advantage?

c) )Derive and sketch the production possibility frontier for each country.
d) Assume that, prior to trade, the U.S. produces 5000 shirts and 15,000 bushels of food, while
China produces 15000 shirts and 5000 bushels of food. Show how it is possible, by altering
production in each country, to increase total world output of both goods.

e) If trade is allowed between the two countries, what will the pattern of trade be (i.e., what good
will the US export and what good will it import), how does trade affect the real wage in each
country and what can you conclude about the post-trade relative price of shirts?

2) Consider a country which can produce two goods: cloth (C) and food (F) using two inputs:
labor (L) and land (T). Production of each good requires inputs to be used in fixed proportions as
follows (these are called Leontief technologies):

To produce cloth (C): 2 units of labor and 4 units of land are required for each unit of C.
To produce food (F): 4 units of labor and 2 units of capital are required for each unit of F.

Let L T, represent the total amount of labor and capital available in the economy,

a) Find the production possibility frontier (ppf) for this economy and sketch it.

b) Show how an increase in the supply of capital shifts the ppf and the production point where
inputs are fully used (in this simple version, there is a unique production point that represents full
employment of both inputs).

c) Assume two countries (the VN and Malay) have identical tastes and technology, but the VN has
more land and Malay has more labor. Assuming the relative demand (ratio of demand for cloth to
demand for manufactures) is independent of income, discuss how autarky goods prices and factor
prices differ between the two countries, then discuss how trade affect factor prices in each country.
(graphically)
3) Cho biểu đồ 2 nước, điền từ vào chỗ trống.

Tại nước A, production point is... comsumption point is....

Tại nước B, production point is... comsumption point is....
Gain của nước A là....
Gain của nước B là...
production point is... comsumption point is....