PLEASE ANSWER THE QUESTION WITH EXPLANATION China and France produce Bikes and C

Question

PLEASE ANSWER THE QUESTION WITH EXPLANATION

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.

QUESTION TO ANSWER:

Suppose that, in France, the prices of Bikes and Cars are 10% and 50%, respectively.

What good are the French workers going to produce?

BIKE

CAR

CHINA

2 Hrs.

16 Hrs.

FRANCE

8 Hrs.

8 Hrs.

Explanation / Answer

In France both the good take same time of 8 hrs and Price of Car is higher than Price of Bike hence they should produce cars the most

AS we see China has Comparative advantage in producing Bikes than that of France simliarly France has an comaparative advantage in prodcng Cars to that of China Hence China should produce Bike and France should only use labor to produce Cars

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