Determining Gainsi'rom Trade x a m-AnnaGong-Dmloox x l u CourseHero x l B: GoogleTranslate x l + o 6 9 C i gastate.uiew.usg.edu,id2|,Ilalcontent53624fviewContent146486388Niew if V B" *- '55 Apps ER 5 Cambridge Free E... Q WE-tm... - gilL-k... Data information monitors Ii Ads Manager save . Riyemlood Fashlo... Reading List Suppose that Lawrence faces the following opportunity costs: 0 The opportunity cost of producing 1 unit of exercise equipment is 0.2 units of electricity. 0 The opportunity cost of producing 1 unit of electricity is 5 units of exercise equipment. Suppose that Francesco faces the following opportunity costs: 0 The opportunity cost of producing 1 unit of exercise equipment is 10 units of electricity. 0 The opportunity cost of producing 1 unit of electricity is 0.1 units of exercise equipment. Suppose that the terms of trade are such that 1 unit of exercise equipment trades for 0.9 units of electricity. Because Lawrence has the lower opportunity cost of producing exercise equipment, they will specialize in the production of exercise equipment and trade with Francesco to get electricity. Because Francesco has the lower opportunity cost of producing electricity, they will specialize in the production of electricity and trade with Lawrence to get exercise equipment. Both parties will benefit from this trade. We can see this by noting the following: 1. Consider Lawrence with and without specialization and trade. Recall that they will specialize in the production of exercise equipment with specialization and trade. 0 Without specialization and trade, Lawrence must give up [select] v unitts) of exercise equipment in order to gain 1 unit of electricity. 0 With specialization and trade, Lawrence can produce 1 unit of exercise equipment and trade it for 0.9 units of electricityI so they must give up only (select) v unit(s) of exercise equipment in order to gain 1 unit of electricity. In this case, 1 unit of electricity costs them fewer units of exercise equipment with trade than without trade. Therefore, Lawrence is better off with specialization and trade. 2. Consider Francesco with and without specialization and trade. Recall that they will specialize in the production of F20213020Hyb....doc A 'i Petrobrajpeg A '3 PETROBRASJpeg A 'i Petrobras'slogoneg A ShDWAll X Determining Gainstrom Trade x a m-AnnaGong-Dmlook x l u CourseHero x l B: GoogleTranslate x l + o 6 9 C i gastate.yiew.usg.edu,id2|,IleJcontentIZE53624fviewConten46486388Niew if V B" *- '55 Apps ER 5 Cambridge Free E... Q WE-tlt... - glL-k... Data information monitors Ii Ads Manager save . Rivenyood Fashio... Reading List Both parties will benet from this trade. We can see this by noting the following: 1. Consider Lawrence with and without specialization and trade. Recall that they will specialize in the production of exercise equipment with specialization and trade. 0 Without specialization and trade, Lawrence must give up [select] v unitts) of exercise equipment in order to gain 1 unit of electricity. 0 With specialization and trade, Lawrence can produce 1 unit of exercise equipment and trade it for 0.9 units of electricity, so they must give up only (select) v unit{s) of exercise equipment in order to gain 1 unit of electricity. In this case, 1 unit of electricity costs them fewer units of exercise equipment with trade than without trade. Therefore, Lawrence is better off with specialization and trade. 2. Consider Francesco with and without specialization and trade. Recall that they will specialize in the production of electricity with specialization and trade. 0 Without specialization and trade, Francesco must give up (select) v unitls} of electricity in order to gain 1 unit of exercise equipment. 0 With specialization and trade, Francesco can produce 1 unit of electricity and trade it for 1.11 units of exercise equipment, so they must give up only (select) v unit[s) of electricity in order to gain 1 unit of exercise equipment. In this case, 1 unit of exercise equipment costs them fewer units of electricity with trade than without trade. Therefore, Francesco is better off with specialization and trade. Directions: Answer the questions above based on the information given. Round your numerical responses to the nearest hundredth. F20213020Hyb....doc A 'i Petrobrajpeg A '3 PETROBRASJpeg A 'i Petrobras'slogoneg A SHOW\" X