Assume that China and France each have 1,000 production units.

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Assume that China and France each have 1,000 production units. With one unit of production (a mix of land, labor, capital, and technology), China can produce either 10 containers of toys or 7 cases of wine. France can produce either 2 cases of toys or 7 cases of wine. Thus, a production unit in China is five times as efficient compared to France when producing toys, but equally efficient when producing wine. Assume at first that no trade takes place. China allocates 800 production units to building toys and 200 production units to producing wine. France allocates 200 production units to building toys and 800 production units to producing wine. a. What is the production and consumption of China and France without trade ?

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Production is the total goods being manufactured inside the company for the purpose of sale to the final consumers and suppliers. It is a process when the raw materials are converted to the final product ready to be used by the user

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Last Update: Tue, 31 May 22