The following graph is the respective production possibility curves for the USA and South Korea. It shows there total output of medical devices and cars in a state of autarky (no trade), and it illustrates the gains that both countries can benefit from when they engage in trade:

Answer the following questions utilizing the textbook and your lecture videos:

1) What assumption in the production possibilities model may lead the model to overstate the gains from trade and cause the actual gains to be less than predicted by the model?

2) Who gains from trade in this scenario? Who may be hurt by trade in this scenario?

3) Do you think there is a role for the government to help those who are hurt by trade in this scenario?