Germany and France produce Televisions (T) and Microwaves (M). Both
products are made with labor only. The following table shows the unit labor
requirements (hours per unit produced) for each product in each country.
Televisions Microwave
Germany 4 1
France 6 1
For each country, calculate the opportunity cost of the TV in terms of microwaves
and the opportunity cost of the microwave in terms of televisions, and indicate
where it is cheaper to produce televisions and where it is cheaper to produce
microwaves.
Between what values should the price of the TV set be in terms of microwave
(PT /PM)) for there to be trade between Germany and France?
Calculate the wage level for each country. [Hint: for this, you must make some
assumptions, such as setting a value for the price of the TV set in terms of
microwave, and with this, set the price (in $) of the TV set (PT) and the price (in
$) of the microwave (PM)]. Then, calculate the costs (in $) for each product in
each country. With this result, explain the cost advantage that each country has
for exporting a given product.
