Question

A German worker takes 600 hours to produce a car and 3 hours to produce a case of wine. A French worker takes 800 hours to produce a car and X hours to produce a case of wine. For what values of X will gains from trade be possible?
a. 800.
b. 820.
c. 900.
d. 950.
For what values of X will Germany export cars and import wine? Check all that apply.
a. 1.
b. 3.
c. 900.

Answer 1

Answer:

Kindly check explanation

Explanation:

Given the following :

German worker :

600 hours to produce a car

3 hours to produce a cas of wine

French worker:

800 hours to produce a car

X hours to produce a case of wine

A) for what values of X will gains from the trade be possible :

We have to calculate the opportunity cost of producing the product :

German worker :

Opportunity cost of producing a car

Hours of car / hours of wine = 600 / 3

200 wine passed up to produce a car

For French worker :

Opportunity cost of producing a car:

800 / X

Equating both :

200 = 800/X

X = 800/200

X = 4

200<x/4

X > 800

Hence

820, 900 and 950 are values of X for which gains will be possible.

B) for what values of X will Germany export cars and import wine then they will have a comparative advantage, hence

600/3 < 800/x

200 = 800/x

X < 4

X = 1 or 3