3. Be sure to label all points. Suppose the domestic autarky relative price M/S=1 and autarky consumption takes place at point A with (M/S) (75, 100). Production with free trade takes place at point B with (M, S) (100, 70). Does the country specialize in the production of M or S? The country exports 15 units of M and 45 units of S are imported. Find the consumption bundle (M, S) and label it point C. Sketch the trade triangle. What are the terms of trade? Evaluate the gains from trade in terms of M for this economy. M %24
3. Be sure to label all points. Suppose the domestic autarky relative price M/S=1 and autarky consumption takes place at point A with (M/S) (75, 100). Production with free trade takes place at point B with (M, S) (100, 70). Does the country specialize in the production of M or S? The country exports 15 units of M and 45 units of S are imported. Find the consumption bundle (M, S) and label it point C. Sketch the trade triangle. What are the terms of trade? Evaluate the gains from trade in terms of M for this economy. M %24
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
![3. Be sure to label all points. Suppose the domestic autarky relative price M/S=1 and autarky
consumption takes place at point A with (M/S) (75, 100). Production with free trade takes place at
point B with (M, S) = (100, 70). Does the country specialize in the production of M or S? The country
exports 15 units of M and 45 units of S are imported. Find the consumption bundle (M, S) and label it
point C. Sketch the trade triangle. What are the terms of trade? Evaluate the gains from trade in terms
of M for this economy.
M
2](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F87f36e2f-e984-4a33-847a-7152589a4339%2Fce25d36a-4e33-4904-9b36-fbf764cbb4bf%2Fj2ra6qp_processed.jpeg&w=3840&q=75)
Transcribed Image Text:3. Be sure to label all points. Suppose the domestic autarky relative price M/S=1 and autarky
consumption takes place at point A with (M/S) (75, 100). Production with free trade takes place at
point B with (M, S) = (100, 70). Does the country specialize in the production of M or S? The country
exports 15 units of M and 45 units of S are imported. Find the consumption bundle (M, S) and label it
point C. Sketch the trade triangle. What are the terms of trade? Evaluate the gains from trade in terms
of M for this economy.
M
2
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