Problems on International Trade Name: Chapter 35 in The Economy Today Chapter 20 in The Macro and Micro Economy Today 1. Suppose a country can produce a maximum of 1,000 jumbo airliners or 800 aircraft carriers. (a) What is the opportunity cost of an aircraft carrier? (b) If another country offers to trade six planes for four aircraft carriers, should the offer be . accepted? (c) What are the implied terms of trade? 2. If it takes 64 farm workers to harvest one ton of strawberries and 16 farm workers to harvest one ton of wheat, what is the opportunity cost of five tons of strawberries? 3. Alpha and Beta, two tiny islands off the east coast of Tricoli, produce pearls and pineapples. The following production possibilities schedules describe their potential output in tons per year. Alpha Beta Pearls Pineapples Pearls Pineapples 0 30 0 20 25 10 16 20 20 12 15 30 8 10 40 10 5 45 12 50 ON (a) Graph the production possibilities confronting each island. (b) What is the opportunity cost of pineapples on each island (before trade)? . Alpha: Beta: (c) Which island has a comparative advantage in pearl production? () Graph the consumption possibilities of each island with free-trade. ALPHA BETA 30 45 1 25 20 30 QUANTITY OF PINEAPPLES 15 QUANTITY OF PINEAPPLES 10 15 UT 5 10 20 25 30 15 30 45 50 QUANTITY OF PEARLS QUANTITY OF PEARLS