TEA (Millions of pounds) 48 42 38 30 24 18 12 6 PPF Maldonia (?) TEA (Millions of pounds) 48 42 38 PPF 30 24 18 12 6 18, 9 A Sylvania 0 0 0 6 12 18 24 30 38 42 48 0 8 12 18 24 30 38 42 48 GRAIN (Millions of pounds) GRAIN (Millions of pounds) (?) Maldonia has a comparative advantage in the production of production of most the two countries can produce is , while Sylvania has a comparative advantage in the . If each fully specializes (that is, produces only the good for which each has a comparative advantage), the million pounds of grain and million pounds of tea. Suppose that Maldonia and Sylvania specialize and open up to international trade, and the terms of trade in the world market are 1 pound of grain for 1 pound of tea. That is, Maldonia is willing to sell Sylvania 1 pound of grain in exchange for 1 pound of tea, and Sylvania is willing to sell Maldonia 1 pound of tea in exchange for 1 pound of grain. The countries decide to exchange 12 million pounds of grain for 12 million pounds of tea.
TEA (Millions of pounds) 48 42 38 30 24 18 12 6 PPF Maldonia (?) TEA (Millions of pounds) 48 42 38 PPF 30 24 18 12 6 18, 9 A Sylvania 0 0 0 6 12 18 24 30 38 42 48 0 8 12 18 24 30 38 42 48 GRAIN (Millions of pounds) GRAIN (Millions of pounds) (?) Maldonia has a comparative advantage in the production of production of most the two countries can produce is , while Sylvania has a comparative advantage in the . If each fully specializes (that is, produces only the good for which each has a comparative advantage), the million pounds of grain and million pounds of tea. Suppose that Maldonia and Sylvania specialize and open up to international trade, and the terms of trade in the world market are 1 pound of grain for 1 pound of tea. That is, Maldonia is willing to sell Sylvania 1 pound of grain in exchange for 1 pound of tea, and Sylvania is willing to sell Maldonia 1 pound of tea in exchange for 1 pound of grain. The countries decide to exchange 12 million pounds of grain for 12 million pounds of tea.
Chapter2: Economic Tools And Economic Systems
Section: Chapter Questions
Problem 2.3P
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Transcribed Image Text:TEA (Millions of pounds)
48
42
38
30
24
18
12
6
PPF
Maldonia
(?)
TEA (Millions of pounds)
48
42
38
PPF
30
24
18
12
6
18, 9
A
Sylvania
0
0
0
6
12 18
24
30
38
42
48
0
8
12
18
24
30
38
42
48
GRAIN (Millions of pounds)
GRAIN (Millions of pounds)
(?)
Maldonia has a comparative advantage in the production of
production of
most the two countries can produce is
, while Sylvania has a comparative advantage in the
. If each fully specializes (that is, produces only the good for which each has a comparative advantage), the
million pounds of grain and
million pounds of tea.
Suppose that Maldonia and Sylvania specialize and open up to international trade, and the terms of trade in the world market are 1 pound of grain for
1 pound of tea. That is, Maldonia is willing to sell Sylvania 1 pound of grain in exchange for 1 pound of tea, and Sylvania is willing to sell Maldonia 1
pound of tea in exchange for 1 pound of grain. The countries decide to exchange 12 million pounds of grain for 12 million pounds of tea.
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