If, in autarky, the country is producing 700 computers and is located at point M on the PPF, the country would be producing autos. If the country is now opened to trade at a terms of trade of 1 auto: 2 computers (or 1 computer: 0.5 auto), it would export. (A) 120; computers B 120; autos C) 280; autos (D) 280; computers

If, in autarky, the country is producing 700 computers and is located at point M on the PPF, the country would be producing autos. If the country is now opened to trade at a terms of trade of 1 auto: 2 computers (or 1 computer: 0.5 auto), it would export. (A) 120; computers B 120; autos C) 280; autos (D) 280; computers

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

Suppose that a country in the Classical model has the following production-possibilities frontier (PPF):
1000
computers
(A) 120; computers
autos
If, in autarky, the country is producing 700 computers and is located at point M on the PPF, the country would be producing
autos. If the country is now opened to trade at a terms of trade of 1 auto: 2 computers (or 1 computer: 0.5 auto), it
would export.
B
C
120; autos
280; autos
M
(D) 280; computers
400

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