Figure 2.2. Canadian Trade Possibilities Televisions 16 12 8 0 4 Canada's Transformation Schedule 8 12 International Terms of Trade с 16 20 B 24 Refrigerators

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Figure 2.2. Canadian Trade Possibilities
Televisions
16
12
8
4
0
Canada's
Transformation
Schedule
Televisions
8
12
International Terms
of Trade
Refrigerators
Televisions and refrigerators
Neither televisions nor refrigerators
с
16
20
B
24
Figure 2.2 shows a straight-line production possibilities curve with televisions on the vertical axis and
refrigerators on the horizontal axis for Canada. The intercept on the vertical axis equals 16 and on the
horizontal axis equals 24. Point A shows a point where an indifference curve is tangent to the
production possibilities curve where televisions on the vertical axis equal 8 and refrigerators on the
horizontal axis equal 12. A downward sloping straight line representing the international terms of
trade starts at a point where refrigerators equal 24; an indifference curve is tangent to this line at a
point where televisions equal 12 and refrigerators equal 16.
Referring to Figure 2.2, Canada has a comparative advantage in:
Refrigerators
Transcribed Image Text:Figure 2.2. Canadian Trade Possibilities Televisions 16 12 8 4 0 Canada's Transformation Schedule Televisions 8 12 International Terms of Trade Refrigerators Televisions and refrigerators Neither televisions nor refrigerators с 16 20 B 24 Figure 2.2 shows a straight-line production possibilities curve with televisions on the vertical axis and refrigerators on the horizontal axis for Canada. The intercept on the vertical axis equals 16 and on the horizontal axis equals 24. Point A shows a point where an indifference curve is tangent to the production possibilities curve where televisions on the vertical axis equal 8 and refrigerators on the horizontal axis equal 12. A downward sloping straight line representing the international terms of trade starts at a point where refrigerators equal 24; an indifference curve is tangent to this line at a point where televisions equal 12 and refrigerators equal 16. Referring to Figure 2.2, Canada has a comparative advantage in: Refrigerators
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