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following table shows the amount of corn and wheat that two countries could produce if they devoted all of their resources to that good.
following table shows the amount of corn and wheat that two countries could produce if they devoted all of their resources to that good. That is, England for example, could produce at most 200 units of wheat or 400 units of corn. Assume that the tradeoff between crops remains constant as resources are shifted from one crop to another. Both countries have the same amount of resources. Wheat Corn England 200 400 Germany 300 900 [a] Which country has the absolute advantage in wheat? In corn? [b] What is England's marginal opportunity cost of producing wheat? Corn? [c] What is Germany's marginal opportunity cost of producing wheat? Corn? [d] Which country has the comparative advantage in wheat? In corn? [e] Plot the countries combined marginal cost curve for producing wheat. Plot the combined marginal cost curve for producing corn. [f] Suppose both countries are currently independent and devoting half of their resources to the production of corn and half to the production of wheat. What would be the total amount of wheat and corn produced? g] Assume both countries wish to expand their corn consumption while at the same time maintaining their wheat consumption. Is this possible if they refuse to trade? Why? ] Assume both countries agree to trade. Show that they will be able to expand their corn consumption while maintaining their wheat consumption. What are the total gains from exchange, measured in units of corn?
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