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help Assume that China and France each have 1,000 production units. With one production, China can produce either 10 containers of toys or 7 cases
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Assume that China and France each have 1,000 production units. With one production, China can produce either 10 containers of toys or 7 cases of wine, France can produce either 2 containers of toys or 7 cases of wine. Assume complete specialization where China produces 10000 containers of toys and France produces 7000 cases of wine. Both countries agree to trade at a mid-price where 5 containers of toys equals 7 cases of wine. Assume France exports 1400 cases of wine to China. In return of 1400 cases of wine China imports from France, China exports containers of toys. At the end, China consumes containers of toys and cases of wine. At the end, France consumes containers of toys and cases of wine. Compared to no-trade case, where China consumes 8000 containers of toys and 1400 cases of wine and France consumes 400 containers of toys and 5600 cases of wine, both countries is better off because they consume more toys. O True False Step by Step Solution
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