Assignment 5

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Bevill State Community College *

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231

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Economics

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Jun 13, 2024

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docx

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Uploaded by annaliz1104

Assignment 5 The following hypothetical production possibilities tables are for China and the United States. Assume that before specialization and trade the optimal product mix for China is alternative B and for the United States is alternative U. China Production Possibilities Product A B C D E F Apparel (in thousands 30 24 18 12 6 0 Chemicals (in tons) 0 6 12 18 24 30 U.S. Production Possibilities Product R S T U V W Apparel (in thousands 10 8 6 4 2 0 Chemicals (in tons) 0 4 8 12 16 20 a. Are the comparative-cost conditions such that the two areas should specialize? If so, what product should each produce? China should produce apparel, and the U.S. should produce chemicals. b. What is the total gain in apparel and chemical output that would result from specialization? The gain in apparel would be 2000 units and the gain in chemicals would be 2 tons. c. Explain why this illustration allows you to conclude that specialization according to comparative advantage results in more efficient use of world resources. This example shows that the world is obtaining more output from its fixed resources so we can determine that specialization according to comparative advantage results in more efficient use of world resources.
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