PLEASE ANSWER THE QUESTION WITH EVIDENCE AND EXPLANATION.... PLEASE USE THE COUN

Question

PLEASE ANSWER THE QUESTION WITH EVIDENCE AND EXPLANATION....

PLEASE USE THE COUNTRIES (CHINA and FRANCE) AND THE GOODS (BIKES AND CARS)

China and France produce Bikes and Cars. Both goods are manufactured using only one production factor (LABOR). The following table shows the unit labor requirements for each product in each country.

BIKE

CAR

CHINA

2 Hrs.

16 Hrs.

FRANCE

8 Hrs.

8 Hrs.

NOTE: CHINA HAS 10,000 WORKERS AND FRANCE HAS 5,000 WORKERS.

QUESTIONS:

1. Suppose that in autarky (no trade), China produces and consumes 500 Cars.

Find the quantity of Bikes that is produced and consumed.

BIKE

CAR

CHINA

2 Hrs.

16 Hrs.

FRANCE

8 Hrs.

8 Hrs.

Explanation / Answer

Answer - According to the given information, China has 10,000 workers. 2 hours (workers) needed in order to produce one bike. On the other hand China can produce one car by using 16 hours (workers). There is not trade between China and France. China produces and consumes 500 cars.

China devoted labor into production of car = 500*16

China can produce 500 cars if it use 8000 worker in the production of cars.

Now, remaining workers (10000 - 8000 = 2000) will produce bikes in China.

China will produce bikes = 2000 / 2

China will produce and consumes 1000 bikes by using 2000 hours (workers).

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