3. Change in Relative Price and Trade T-shirts 800 700 600 500 400 300 200 100 100 200 300 400 500 600 700 800 Books Aggieland can trade with Spartan at a relative price of Books (Pa/Pr) of 1/2. Find the optimal production point on PPF and mark as Pc. How many units of Books and how many units of T-shirts will Aggieland produce at Pc? Draw a consumption possibilities line (mark as VVc) with slope of 1/2 tangent to Aggieland's PPF at Pc. Find the optimal consumption point along the consumption possibilities line (VVc) tangent to the highest community indifference curve and mark as Ce. How many units of Books and how many units of T-shirts will Aggieland consume at Cc? Will Aggieland export Books or T-shirts? How many units will it export? Will Aggieland import Books or T-shirts? How many units will it import? Indicate "Exports" and "Imports" on your PPF diagram. How much is the terms of trade of Aggieland? How much is the terms of trade of Spartan? How much are gains from trade and specialization for Aggieland?

3. Change in Relative Price and Trade T-shirts 800 700 600 500 400 300 200 100 100 200 300 400 500 600 700 800 Books Aggieland can trade with Spartan at a relative price of Books (Pa/Pr) of 1/2. Find the optimal production point on PPF and mark as Pc. How many units of Books and how many units of T-shirts will Aggieland produce at Pc? Draw a consumption possibilities line (mark as VVc) with slope of 1/2 tangent to Aggieland's PPF at Pc. Find the optimal consumption point along the consumption possibilities line (VVc) tangent to the highest community indifference curve and mark as Ce. How many units of Books and how many units of T-shirts will Aggieland consume at Cc? Will Aggieland export Books or T-shirts? How many units will it export? Will Aggieland import Books or T-shirts? How many units will it import? Indicate "Exports" and "Imports" on your PPF diagram. How much is the terms of trade of Aggieland? How much is the terms of trade of Spartan? How much are gains from trade and specialization for Aggieland?

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter2: Economic Tools And Economic Systems

Section: Chapter Questions

Problem 3.5P

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