Question
Australia and New Zealand have 140 and 150 total resources, respectively. Each country produces only two goods, Vegemite and Marmite. Australia can produce each jar
Australia and New Zealand have 140 and 150 total resources, respectively. Each country produces only two goods, Vegemite and Marmite. Australia can produce each jar of Vegemite for 14 resources and each jar of Marmite for 23 resources. New Zealand can produce each jar of Vegemite for 6 resources and each jar of Marmite for 30 resources. Assume each country would prefer to consume more Vegemite and Marmite than it currently can in an autarky. Also assume that each country can produce fractional units of each good. Between which range of prices of Marmite (in terms of jars of Vegemite) will there be gains from trade?
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