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The following tables describe the hypothetical PPC (product possibility curves) for Canada and North Korea for Fish and Lumber (both in millions of tonnes). Before
The following tables describe the hypothetical PPC (product possibility curves) for Canada and North Korea for Fish and Lumber (both in millions of tonnes). Before trade Canada produce at point D and North Korea at point B. Canada A B Fish 0 A 16 20 Lumber 100 80 60 40 20 North Korea A B D E Fish O 10 20 30 40 50 Lumber 15 12 19 16 3 In Canada the opportunity cost of 1 unit of Fish is of * * Lumber. In North Korea the opportunity cost of 1 unit of Lumber is|8 38 : > Fish, Canada has a comparative advantage in Fish # x and therefore should import Lumber Assume each country specializes in their area of comparative advantage. For trade to occur, the limits of the terms of trade for 1 uint of Lumber will be 0.2 to 3.33 # Fish.The countries decide to trade 20 units of Fish for 50 units of Lumber. Fill in the following table: Country/|Before Trade Product Trade Specialization After Trade (Import/Export) Gains in Trade Canada Fish 12 V 20 * v 20 # v 8 V Lumber 40 100 # v 50 # v 50 # V 10 # v North Korea Fish 10 50 # V -20 # v 30 # V 20 # v Lumber 12 V 50 # v 50 * V 38 # v After trade, producers * * will be happy in the Canadian Fish market. After trade, in the Canadian Fish market consumers will consume more *
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