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Suppose Anguilla and Barbuda intend to trade 250 bananas (B) for 300 cocoa beans (C). In Anguilla, there are 30000 workers and 1B requires 10
Suppose Anguilla and Barbuda intend to trade 250 bananas (B) for 300 cocoa beans (C). In Anguilla, there are 30000 workers and 1B requires 10 workers while 1C requires 15 workers. Barbuda, with a labour force of 45 000,each banana requires 45 workers while harvesting cocoa beans requires 15 workers. From the information provided, answer the following questions.
- If both countries refuse to trade and allocates half its resource to each good, calculate each country's production.(4 marks)
- With the intention to trade, determine which country holds the absolute and comparative advantage in each good.(6 marks)
- Determine the production each country undertakes with the intention to trade. (7 marks)
- Suppose the countries trade, calculate their consumption after trade.(4 marks)
- Determine the gains of trade. Is the trade mutually beneficial?(4 marks)
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