IT and SP give the current daily production levels for Italy and Spain, respectively. Taph provided shows the PPC for Spain and Italy producing fish and steel. The points Italy 10÷20 30=60 Steel 50 40 10 0 I I IT SP Spain 20 30 40 100 -1 Fish What is Italy's opportunity cost of producing 1 unit of steel? 0-3 What is Spain's opportunity cost of producing 1 pound of fish? Assume now that each country decides to specialize in the good for which they have the comparative advantage then trade with the other country at the following terms of trade: 22 pounds of steel traded for 37 pounds of fish. After the trade, Spain has 63 pounds of fish and 225_units of steel. 7 -12 After the trade, Italy has_34_pounds of fish and 29 units of steel.

IT and SP give the current daily production levels for Italy and Spain, respectively. Taph provided shows the PPC for Spain and Italy producing fish and steel. The points Italy 10÷20 30=60 Steel 50 40 10 0 I I IT SP Spain 20 30 40 100 -1 Fish What is Italy's opportunity cost of producing 1 unit of steel? 0-3 What is Spain's opportunity cost of producing 1 pound of fish? Assume now that each country decides to specialize in the good for which they have the comparative advantage then trade with the other country at the following terms of trade: 22 pounds of steel traded for 37 pounds of fish. After the trade, Spain has 63 pounds of fish and 225_units of steel. 7 -12 After the trade, Italy has_34_pounds of fish and 29 units of steel.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

Question

Hello, I got this wrong if you could please solve it with explanation as to how. Thanks!

IT and SP give the current daily production levels for Italy and Spain, respectively.
Taph provided shows the PPC for Spain and Italy producing fish and steel. The points
Italy
10÷20 30=60
Steel
50
40
10
0
I
I
IT
SP
Spain
20 30 40
100
-1
Fish
What is Italy's opportunity cost of producing 1 unit of steel?
0-3
What is Spain's opportunity cost of producing 1 pound of fish?
Assume now that each country decides to specialize in the good for which they have the comparative
advantage then trade with the other country at the following terms of trade: 22 pounds of steel traded for 37
pounds of fish.
After the trade, Spain has 63 pounds of fish and 225_units of steel. 7 -12
After the trade, Italy has_34_pounds of fish and 29 units of steel.

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Step 1: Opportunity cost and comparative advantage:

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Step 2: Opportunity cost of steel in country-I:

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Step 3: Opportunity cost of fish in country-S:

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Step 4: Post-trade consumption bundle of country-S:

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Step 5: Post-trade consumption bundle of country-I:

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