Answer th following:If Nation 2 is to enter trade. In what good will it specialize? Why?If Nation 2 is to specialize in the good of its comparative advantage, how much good X and good Y will Nation 2 produce?Suppose after specialization, Nation 2 exports 100 units of the good of its comparative advantage [your answer in 1], how much of X and Y will it consumer after tradeWill Nation 2 enjoy welfare gains from trade? Provide evidence Consider the two following nations and the amount of output X and Y that they can produce in1an hour. The community utility function of both nation is given by U =X²Y²A.712This means that forXSuppose the international price of good X is Pevery unit of good X, imported, the importing nation must pay - units of Y.7127[i.e. Y1/2 X].=X (units/hr)Y (units/hr)Available Labor Supply (in hrs)Nation 184100=Nation 232100

Comparative advantage refers back to the monetary principle that states that entities (consisting of…

Answered: comparative advantage

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Answer th following:

If Nation 2 is to enter trade. In what good will it specialize? Why?

If Nation 2 is to specialize in the good of its comparative advantage, how much good X and good Y will Nation 2 produce?
Suppose after specialization, Nation 2 exports 100 units of the good of its comparative advantage [your answer in 1], how much of X and Y will it consumer after trade
Will Nation 2 enjoy welfare gains from trade? Provide evidence

Consider the two following nations and the amount of output X and Y that they can produce in
1
an hour. The community utility function of both nation is given by U =
X²Y²
A.
7
12
This means that for
X
Suppose the international price of good X is P
every unit of good X, imported, the importing nation must pay - units of Y.
7
12
7
[i.e. Y
1/2 X].
=
X (units/hr)
Y (units/hr)
Available Labor Supply (in hrs)
Nation 1
8
4
100
=
Nation 2
3
2
100

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