International Trade and Comparative Advantage Shown below are the production possibilities curves for two nations: the United States and Chile. Suppose these two nations do not currently engage in international trade or specialization, and suppose that points A and a show the combinations of wheat and copper they now produce and consume. United States Chile 10 10 8 United Chile States 6 Wheat (in thousands of pounds) Wheat (in thousands of pounds) 2 2 10 0 10 6 8 Copper (thousands of pounds) Copper (thousands of pounds) Country Max. Wheat Opp. Cost Ratio Max. Cooper Opp. Cost Ratio Wheat Copper United States 1W = 1C = W Chile 1W = 1C = W Column #1 #2 #3 #4 #5 Amounts Gains from Outputs after Exported Outputs Available Specialization and Specialization and Imported After Trade Trade Outputs before (Question #3 has (Data in question (Column #2 plus or (Column #4 - Country Specialization the answer) #4 below minus Column #3) Column #1) (Point A on Graph) Minus Wheat United Wheat Wheat Plus Wheat Wheat Cooper States Copper Copper Copper Copper (Point a on Graph) Plus Wheat Wheat Wheat Wheat Minus Cooper Wheat Chile Copper Copper Copper CopperInternational Trade and Comparative Advantage Questions 1. What is the United States opportunity cost for wheat and copper show your math work? 2. What is Chile's opportunity cost for wheat and copper show your math work? 3. Could these two countries gain through specialization? If so, in what products should they specialize in? 4. Following specialization, suppose the United States exports 3 thousand pounds of wheat to Chile in exchange for 1 thousand pounds of cooPer. What are the gains from trade for each country? (Show your work on how you calculated this number). 5. What are the limits on the terms of trade between the two nations