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Question 1 (13 marks) The following table shows cars and shirts that Antonio and Batavia can produce with one hour of labor time. Antonio Batavia
Question 1 (13 marks) The following table shows cars and shirts that Antonio and Batavia can produce with one hour of labor time. Antonio Batavia Cars 5 Shirts 10 1 a) Draw the production possibilities frontier (PPF) of cars (on X-axis) and shirts (on Y-axis) for Antonio and Batavia. (5 marks) b) Identify the commodity in which Antonio and Batavia have an absolute advantage. (2 marks) C) Is the trade possible between Antonio and Batavia? Explain your answer based on the law of comparative advantage. (2 marks) d) Suppose the terms of trade (i.e., prices) are such that one car is traded for one shirt. i) What is the range of trade for cars (in terms of shirts) that can benefit both nations? i) What is the range of trade for shirts (in terms of cars) that can benefit both nations? (4 marks)
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