I. Transportation costs and comparative advantage

The following graph shows a fictional world economy that consists of only two countries, Golikia and Bulvia. Both countries produce boats under increasing-cost 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.

The following graph shows a fictional world economy that consists of only two countries, Golikia and Bulvia. Both countries produce boats under increasing-cost 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. ? ) Golikia Bulvia 30 SB 27 24 21 +18 15 PRICE OF BOATS (Thousands of dollars) 12 DA Do 10 9 8 7 6 5 4 3 2 1 1 2 3 4 5 6 7 8 9 10 BOATS