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Assume that the comparative-cost ratios of two products—baby formula and tuna fish—are as follows in the nations of Canswicki and Tunata:        Canswicki: 1 can baby formula ≡ 5 cans tuna fish      Tunata: 1 can baby formula ≡ 7 cans tuna fish   a. In what product should each nation specialize?        Canswicki should produce  _____-  , and Tunata should produce _____          b. Would the following terms of trade be acceptable to both nations?        i. 1 can baby formula ≡ 4 cans tuna fish:         yes or no          ii. 1 can baby formula ≡ 8 cans tuna fish:          yes or no        iii. 1 can baby formula ≡ 5.5 cans tuna fish:         yes or no

Assume that the comparative-cost ratios of two products—baby formula and tuna fish—are as follows in the nations of Canswicki and Tunata:        Canswicki: 1 can baby formula ≡ 5 cans tuna fish      Tunata: 1 can baby formula ≡ 7 cans tuna fish   a. In what product should each nation specialize?        Canswicki should produce  _____-  , and Tunata should produce _____          b. Would the following terms of trade be acceptable to both nations?        i. 1 can baby formula ≡ 4 cans tuna fish:         yes or no          ii. 1 can baby formula ≡ 8 cans tuna fish:          yes or no        iii. 1 can baby formula ≡ 5.5 cans tuna fish:         yes or no

Microeconomics
Microeconomics
13th Edition
ISBN:9781337617406
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter20: International Trade
Section20.1: International Trade Theory
Problem 1ST
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Assume that the comparative-cost ratios of two products—baby formula and tuna fish—are as follows in the nations of Canswicki and Tunata:

 

     Canswicki: 1 can baby formula ≡ 5 cans tuna fish

     Tunata: 1 can baby formula ≡ 7 cans tuna fish

 

a. In what product should each nation specialize?

 

     Canswicki should produce  _____-  , and Tunata should produce _____       

 

b. Would the following terms of trade be acceptable to both nations?

 

     i. 1 can baby formula ≡ 4 cans tuna fish:         yes or no  

 

     ii. 1 can baby formula ≡ 8 cans tuna fish:          yes or no

 

     iii. 1 can baby formula ≡ 5.5 cans tuna fish:         yes or no 

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