Country A Country B 200 Corn 600 150 375 t00 50 50 75100 150 200 25 cars 50 75 100 cars a) What is the opportunity cost of making cars in each country? Make clear how you find this and what it means. b) If the countries were to specialize and trade, which country should specialize in making cars? Why? c) If the countries specialize completely according to comparative advantage (i.e. each produces only what they have the comparative advantage in) what would be the total production of cars and corn? How does this compare to the total production at their original pre-trade production points?

Country A Country B 200 Corn 600 150 375 t00 50 50 75100 150 200 25 cars 50 75 100 cars a) What is the opportunity cost of making cars in each country? Make clear how you find this and what it means. b) If the countries were to specialize and trade, which country should specialize in making cars? Why? c) If the countries specialize completely according to comparative advantage (i.e. each produces only what they have the comparative advantage in) what would be the total production of cars and corn? How does this compare to the total production at their original pre-trade production points?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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