The following graph shows the production possibilities frontier for the imaginary country of Contente under conditions of increasing costs. In the absence of trade, the relative cost of wheat in Contente in terms of computers (or the marginal rate of transformation (MRT) of wheat into computers) is shown by the slope of line f. tangent to the production possibilities frontier at point A 3001 270 240 314 Consumption After Trade ?

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Dols
5. Trading under increasing opportunity costs
The following graph shows the production possibilities frontier for the imaginary country of Contente under conditions of increasing costs. In the
absence of trade, the relative cost of wheat in Contente in terms of computers (or the marginal rate of transformation (MRT) of wheat into
computers) is shown by the slope of line fi, tangent to the production possibilities frontier at point A.
WHEAT (Bushels
3001
210
240
310
180
150
120
00
60
R
0:0
20 2
4
12 14
4 10
COMPUTERS
10
16
20
Consumption After Trade
Which of the following most accurately describes Contente's economy in the absence of trade?
Contente produces 6 computers and 234 bushels of wheat.
O contente araduces and consumes 6 computers and 100 bushels of wheat.
Transcribed Image Text:Dols 5. Trading under increasing opportunity costs The following graph shows the production possibilities frontier for the imaginary country of Contente under conditions of increasing costs. In the absence of trade, the relative cost of wheat in Contente in terms of computers (or the marginal rate of transformation (MRT) of wheat into computers) is shown by the slope of line fi, tangent to the production possibilities frontier at point A. WHEAT (Bushels 3001 210 240 310 180 150 120 00 60 R 0:0 20 2 4 12 14 4 10 COMPUTERS 10 16 20 Consumption After Trade Which of the following most accurately describes Contente's economy in the absence of trade? Contente produces 6 computers and 234 bushels of wheat. O contente araduces and consumes 6 computers and 100 bushels of wheat.
Which of the following most accurately describes Contente's economy in the absence of trade?
O Contente produces 6 computers and 234 bushels of wheat.
Contente produces and consumes 6 computers and 100 bushels of wheat.
O Contente produces and consumes 6 computers and 234 bushels of wheat.
Contente produces 234 bushels of wheat but consumes only 180 bushels of wheat.
Contente consumes 6 computers and 234 bushels of wheat.
At point A, the slope of line fy reveals that Contente must forego
its slope.)
Suppose that Contente recognizes that it has a comparative advantage in the production of computers. Contente decides to specialize in making
computers and enters international trade. The international terms of trade (the price of wheat in terms of computers) are shown by the slope of the
line fa, tangent to the production possibilities frontier at point B.
bushels of wheat in order to produce 1 computer. (Hint: Select a line to see
The slope of f reveals that now Contente foregoes
the production possibilities frontier's slope
Assume that Contente chooses to consume the same number of computers as it did in the absence of trade
is
bushels of wheat in order to produce 1 computer. This means that the absolute value of
On the previous graph, use the purple point (diamond symbol) to indicate Contente's consumption after trade.
According to the graph, Contente's production gain from specialization is
and its consumption gain from trade
Transcribed Image Text:Which of the following most accurately describes Contente's economy in the absence of trade? O Contente produces 6 computers and 234 bushels of wheat. Contente produces and consumes 6 computers and 100 bushels of wheat. O Contente produces and consumes 6 computers and 234 bushels of wheat. Contente produces 234 bushels of wheat but consumes only 180 bushels of wheat. Contente consumes 6 computers and 234 bushels of wheat. At point A, the slope of line fy reveals that Contente must forego its slope.) Suppose that Contente recognizes that it has a comparative advantage in the production of computers. Contente decides to specialize in making computers and enters international trade. The international terms of trade (the price of wheat in terms of computers) are shown by the slope of the line fa, tangent to the production possibilities frontier at point B. bushels of wheat in order to produce 1 computer. (Hint: Select a line to see The slope of f reveals that now Contente foregoes the production possibilities frontier's slope Assume that Contente chooses to consume the same number of computers as it did in the absence of trade is bushels of wheat in order to produce 1 computer. This means that the absolute value of On the previous graph, use the purple point (diamond symbol) to indicate Contente's consumption after trade. According to the graph, Contente's production gain from specialization is and its consumption gain from trade
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