# Autarky price and quantity relationship

The real wage of cheese workers in terms of cheese is the quantity of cheese Using the relationship between wages and prices when zero profit To calculate the autarky real wage, simply plug in the autarky price ratio. By changing the prices from the autarky level, one can obtain different free trade consumption bundles, as shown in Figure 17a. As long as free trade price ratio. U.S. production and consumption in autarky. 0. 1, Quantity of airplanes. 2, The relationship between comparative advantage and factor availability is If the world price is lower than the autarky price, trade leads to imports and.

The real wage can be found by dividing the wage by the price to get, This means the worker can buy 2 pounds of cheese with every hour of work. The Real Wage of Cheese Workers in Terms of Cheese The real wage of cheese workers in terms of cheese is the quantity of cheese that a cheese worker or cheeser can buy with a unit of work. It is calculated by dividing the workers wage by the price of cheese, written as.

## Offer Curves and Trade Equilibrium

Since zero profit obtains in each producing industry we can simply rewrite the relationship derived above to construct the following formula for the real wage. This means that the real wage of a worker in terms of how much cheese can be purchased is equal to labor productivity in cheese production. In other words the amount of cheese that a worker can buy per period of work is exactly the same as the amount of cheese the worker can make in that same period.

The Real Wage of Cheesers in Terms of Wine The real wage of cheesers in terms of wine is the quantity of wine that a cheese worker can buy with a unit of work. It is calculated by dividing the cheeser's wage by the price of wine, written as.

## Real Wage Effects of Free Trade

Using the relationship between wages and prices when zero profit obtains in the cheese industry implies, This means that the real wage of cheesers in terms of wine is the product of labor productivity in the cheese industry and the price ratio. Labor productivity gives the quantity of cheese a cheeser makes in an hour of work.

The price ratio gives the quantity of wine that exchanges for each unit of cheese. The product gives the quantity of wine that a cheeser can buy with a unit of work. To calculate the autarky real wage, simply plug in the autarky price ratio. To calculate the free trade real wage, plug in the free trade price ratio.

The Real Wage of Wine Workers in Terms of Wine The real wage of wine workers in terms of wine is the quantity of wine that a wine worker or winer can buy with a unit of work.

It is calculated by dividing the workers wage by the price of wine, written as. Since zero profit obtains in each producing industry we can rewrite the relationship to get, As with cheese, the real wage of a worker in terms of how much wine can be purchased is equal to labor productivity in wine production.

In other words the amount of wine that a worker can buy per period of work is exactly the same as the amount of wine the worker can make in that same period.

The Real Wage of Winers in Terms of Cheese The real wage of winers in terms of cheese is the quantity of wine that a cheese worker can buy with a unit of work.

It is calculated by dividing the winer's wage by the price of cheese, written as.

Using the relationship between prices and wages when zero profit obtains in the wine industry implies, This means that the real wage of winers in terms of cheese is the product of labor productivity in the wine industry and the price ratio. A country cannot simply export one good and import the rest, i. If there are n commodities, a country is likely to export some and import the rest.

The theory of comparative advantage does tell us that a country cannot import or export all goods. Note that in a world of two goods, the HC does not have a CA in good 2. The workers receive their value of marginal products in each industry in which the country has a CA. It is important to note that the above inequality cannot hold for all industries, in which case the HC exports all goods, and hence trade will not be balanced. Since wage rates are different in these industries, domestic workers fill up the industries that pay the highest wage first and gradually move to other industries with lower wages.

Competitive Advantage "Competitive Advantage" is often used in the business world. A firm is said to have a competitive advantage when it can sustain above normal profits compared with other firms in the same industry. According to Michael Porter, a firm can maintain a competitive advantage when i either its production cost is lower than its rivals cost advantageor ii its product has more desirable attributes than those of its rivals at the same cost differentiation advantage.

He compares the ratio of US to British exports in with the ration of US to British labor productivity for 26 manufacturing industries.