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Ecn 3000 Homework Essay

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Harris ECN 3000 Homework #1b.

Use the following information to answer questions 1-13 below.
Two countries, Athens and Troy, produce two goods, ships and food, according to the following production functions:

1 ship = 4 capital + 2 labor 1 food = 1 capital + 3 labor.

Athens has 200 units of capital and 100 units of labor available to produce ships and food. Troy has 100 units of capital and 150 units of labor available to produce ships and food.

1. Which good is capital intensive in production?

Ship

2. Which good is labor intensive in production?

Food

3. In which country is capital relatively abundant?

Athens

4. In which country is labor relatively abundant?

Tory

5. Based on your …show more content…

Athens

42

33 PPC

CPC

0 25 50 Ships

Tory

50

25 CPC

PPC

0 25 38 50 Ships
10. Supposing that Athens and Troy agree to trade ships and food at an international terms of trade of 1, what observation can you make about their relative demands for ships and food? Which country experiences the greater gains from trade?

1 ship is exchanged 1 food on condition that they agree to trade ships and food at an international term of trade of 1. Athens should trade 12.5 ships to Troy, and Troy should trade 8.5 foods to Athens. Troy will experience the greater gains from trade.

11. Draw the consumption possibilities curve for each country on the same graph you drew for question 9.

12. Suppose Athens wants to consume only 25 ships. How many food will it be able to consume? How many ships and how many food would Troy be able to consume?

If Athens wants to consume only 25 ships, 58 foods will it be able to consume. 50 ships, 25 foods should Troy be able to consume.

13. Now, assume that only Athens discovers a new

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