Consider two countries, the United States and India, producing two commodities, food and clothing. The United States needs one and a half hours of labor to produce a unit of food and one hour to produce a unit of clothing. India needs three hours of labor to produce a unit of food and one hour to produce a unit of clothing. The United States is endowed with 800 hours of labor while India is endowed with 1000 hours of labor.
1. Draw a table to show the unit labor requirements for each country for each commodity. Which country has an absolute advantage in the production of food? In the production of clothing? Why? Which country has a comparative advantage in the production of food? In the production of clothing? Why?
2. Draw the production possibility frontiers (PPF) for each country, placing clothing on the horizontal axis and food on the vertical axis. What is the marginal rate of transformation (MRT) in each country? Which country will export which well?