Both countries of goods without any trade. better off than when there was no trade: could have the same combination likes these prices better than the first set of prices.
Both countries of goods without any trade. better off than when there was no trade: could have the same combination likes these prices better than the first set of prices.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The Power of Trade and Comparative Advantage: Work It Out 7
Here's another specialization and exchange problem. This problem is wholly made-up, so that you won't be able to use your
intuition about the names of countries or the products to figure out the answer.
Consider the following productivity table:
Mandovia
Ducennia
Number of Hours to Make One Rotid
50
150
f. This time, the trade negotiations turn out differently: It's two rotids for one tauron. Have the correct country ship 10
million rotids, have the other send 5 million taurons, and fill in the numbers. Are both countries better off than if there were
no trade? Which country likes this trade deal better than the deal from part e?
Consumption of rotids for Mandovia:
Total rotid consumption:
Number of Hours to Make One Tauron
100
200
Consumption of taurons for Mandovia:
Consumption of rotids for Ducennia:
Consumption of taurons for Ducennia:
Transcribed Image Text:Both countries
of goods without any trade.
better off than when there was no trade:
could have the same combination
likes these prices better than the first set of prices.
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