Several countries produce many of the same goods. Suppose that there are two countries, each of which
Question:
Several countries produce many of the same goods. Suppose that there are two countries, each of which produces the same two goods. Country 1 has 300 workers and Country 2 has 900 workers. The following table shows how many workers are necessary in each country to produce one unit of each good, and how much of each good each country produces when there is no trade:
a. What is the maximum amount of each good that Country 1 can produce when there is no trade? How many units of each good can Country 2 produce?
b. Which country has a comparative advantage in producing Good 1 and Good 2?
c. Draw the production possibility frontier for each country when there is no trade and show where the two produce on it.
d. Draw the production possibility frontier when the two countries trade with each other.
e. Show that both countries can benefit from trade.
Step by Step Answer:
SOLUTION Okay lets solve this stepbystep a Country 1 can produce 30 units of Good 1 and 6 units of G...View the full answer
