Suppose that Maldonia and Desonia agree to trade. Each country focuses its resources on producing only the good in which it has a comparative advantage. Maldonia has a comparative advantage in the production of grain. The countries decide to exchange 4 million pounds of grain for 4 million pounds of tea. This ratio of goods is known as the terms of trade between Maldonia and Desonia. The following graph shows the PPF for Maldonia, as well as its initial consumption at point A. Place a black point (cross symbol) on the graph to indicate Maldonia's consumption after trade. Note: Dashed drop lines will automatically extend to both axes. TEA (Milons of pounds) 9 H 2 R 0 PPF 2 4 Maldonia 6 B 10 GRAIN (Millions of pounds) After trade, Maldonia consumes 12 14 10 million pounds of grain as well as Consumption After Trade million pounds of tea.

Suppose that Maldonia and Desonia agree to trade. Each country focuses its resources on producing only the good in which it has a comparative advantage. Maldonia has a comparative advantage in the production of grain. The countries decide to exchange 4 million pounds of grain for 4 million pounds of tea. This ratio of goods is known as the terms of trade between Maldonia and Desonia. The following graph shows the PPF for Maldonia, as well as its initial consumption at point A. Place a black point (cross symbol) on the graph to indicate Maldonia's consumption after trade. Note: Dashed drop lines will automatically extend to both axes. TEA (Milons of pounds) 9 H 2 R 0 PPF 2 4 Maldonia 6 B 10 GRAIN (Millions of pounds) After trade, Maldonia consumes 12 14 10 million pounds of grain as well as Consumption After Trade million pounds of tea.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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