7. Transportation costs and comparative advantage The following graph shows a fictional world economy that consists of only two countries, Colikia and Bulia. Both countries produce beats under increasing cast conditions. Note that the left hand part of the diagram is a mirror image of a standard supply demand diagram, and therefore the supply and demand curves slope in directions opposite their usual directions. Golikin DE PRICE OF BOATS [Thousands of dallas] 24 21 109 8 7 6 5 4 3 2 1 BOATS 12 3 4 5 6 7 8 910 In the atriance of trade (that is, autarky), the equilibrium price in Calikis is [ $12,000, and the equilibrium price in Butvia is [ $24,D00 (Hint: Enter all monetary values in full. For example, $7,000 rather than $7.) In the abriance of trade, which of the following statements is correct? Golkia and Bulvia are equally good at producing boats. O Golkia has the comparative advantage in production of boats. Butvia has the comparative advantage in production of boats. Now suppose both countries open up to international trade with each other. for each country, use the previous graph to compute the equalizing prices, consumption and production at that price, and the quantity of axparts and booparts when there are no transportation costs. Enter chase amounts into the first two rows of the following table. Equalizing Price Consumption at Equalizing Price Production at Equalizing Price Exports Imports Dollars (Bouts) (Boats) "Boats) (Boats) Without Transportation Costs Golikia Bulvia With Transportation Costs Golikia Bulvia 00 00 00 00 Now suppose that the per-unit cast of transporting a boat Between Golikia and Bulvia is $6,000. For wach country, use the previous graph to compute the equalizing price, consumption and production at that price, and the quantity of axparts and Mopores whin transportation costs equal $6,000. Enter these amounts into the last two rows of the previous table. Coxspare free trade is the absence of transportation costs with the case when transportation costs are toeluded. Which of the following statements about how the trade between Golkia and Buivia differs in the presence of transportation costs relative to trade when than are no transportation costs are correct? Check al that apply. O Bulvia will produce more, consume less, and import less. . Butvia will produce less, consume more, and export less. 0 Golikia will produce mart, consume less, and import less. o Gelkia will produce less, consume more, and export less