The following hypothetical production possibilities tables for China and Canada. Assume that, before specialization and trade, the optimal product mix for China is alternative B and for Canada is alternative U. Product Apparel (in thousands) Chemicals (in tons) Product Apparel (in thousands) Chemicals (in tons) A 120 0 units R 40 0 B 96 24 S 32 16 China Production Possibilities с 72 48 D 48 72 Canada Production Possibilities T 24 32 What are the gains from specialization and trade for each nation? Gain of units of apparel and [ tons of chemicals. U 16 48 E 24 96 V 8 64 F 0 120 a. Are comparative cost conditions such that the two areas should specialize? (Click to select) If so, what product should each produce? China should produce [(Click to select Canada should produce [(Click to select b. What is the total gain in apparel and chemical output that would result from such specialization? Instructions: Enter your responses as whole numbers. Apparel: Chemicals: tons c. What are the limits of the terms of trade? Limits of the terms of trade =[ units of apparel for 1 ton of chemicals and units of apparel for 2 tons of chemicals. Suppose that the actual terms of trade are 1 unit of apparel for 1½ units of chemicals and that 16 units of apparel are exchanged for 24 units of chemicals. W 0 80
The following hypothetical production possibilities tables for China and Canada. Assume that, before specialization and trade, the optimal product mix for China is alternative B and for Canada is alternative U. Product Apparel (in thousands) Chemicals (in tons) Product Apparel (in thousands) Chemicals (in tons) A 120 0 units R 40 0 B 96 24 S 32 16 China Production Possibilities с 72 48 D 48 72 Canada Production Possibilities T 24 32 What are the gains from specialization and trade for each nation? Gain of units of apparel and [ tons of chemicals. U 16 48 E 24 96 V 8 64 F 0 120 a. Are comparative cost conditions such that the two areas should specialize? (Click to select) If so, what product should each produce? China should produce [(Click to select Canada should produce [(Click to select b. What is the total gain in apparel and chemical output that would result from such specialization? Instructions: Enter your responses as whole numbers. Apparel: Chemicals: tons c. What are the limits of the terms of trade? Limits of the terms of trade =[ units of apparel for 1 ton of chemicals and units of apparel for 2 tons of chemicals. Suppose that the actual terms of trade are 1 unit of apparel for 1½ units of chemicals and that 16 units of apparel are exchanged for 24 units of chemicals. W 0 80
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter3: Interdependence And The Gains From Trade
Section: Chapter Questions
Problem 6CQQ
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