Suppose China and India are both able to produce tea and cloth by only using labor.In China,it takes 1 unit of labor to produce 1 kilogram of tea and 2 units of labor to produce 1 meter of cloth.In India,it takes 2 units of labor to produce 1 kilogram of tea and 2 units of labor to produce 1 meter of cloth.
(A)Suppose China has 1,000 units of labor and India has 800 units of labor.Draw the production possibilities curve without trade for each country.
(B)Which country has the absolute advantage in tea production? Which country has a comparative advantage in tea production? Which country has a comparative advantage in cloth production?
(C)In what range would the world trading price ratio lie when these countries open up to free trade?

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The Answer of Suppose China and India are both able to produce tea and cloth by only using labor.In China,it takes 1 unit of labor to produce 1 kilogram of tea and 2 units of labor to produce 1 meter of cloth.In India,it takes 2 units of labor to produce 1 kilogram of tea and 2 units of labor to produce 1 meter of cloth.
(A)Suppose China has 1,000 units of labor and India has 800 units of labor.Draw the production possibilities curve without trade for each country.
(B)Which country has the absolute advantage in tea production? Which country has a comparative advantage in tea production? Which country has a comparative advantage in cloth production?
(C)In what range would the world trading price ratio lie when these countries open up to free trade?

Suppose China and India Are Both Able to Produce Tea