The following hypothetical production possibilities tables are for China and the United States. Assume that before specialization and trade the optimal product mix for China is alternative B and for the United States is alternative U. China Production Possibilities Product A E Apparel Chemicals (tons) 120,000 96,000 72,000 48,000 24,000 24 48 72 96 120 U.S. Production Possibilities Product R V W

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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The following hypothetical production possibilities tables are for China and the United States. Assume that before specialization and
trade the optimal product mix for China is alternative B and for the United States is alternative U.
China Production Possibilities
Product
A
Apparel
Chemicals (tons)
120,000
96,000
72,000
48,000
24,000
24
48
72
96
120
U.S. Production Possibilities
Product
R.
W
Apparel
Chemicals(tons)
40,000
32,000
24,000
16,0000
8,000
16
32
48
64
80
Instructions: Enter your answers as whole numbers.
a. Are comparative-cost conditions such that the two countries should specialize?
Yes
If so, what product should each produce?
China should produce apparel O
The United States should produce chemicals
b. What is the total gain in apparel and chemical output that would result from such specialization?
Apparel: 224000 8 units
Chemicals:
144 8 ton(s)
c. What are the limits of the terms of trade?
1000 O units of apparel for 1 ton of chemicals and
1000 O units of apparel for 2 tons of chemicals.
Transcribed Image Text:The following hypothetical production possibilities tables are for China and the United States. Assume that before specialization and trade the optimal product mix for China is alternative B and for the United States is alternative U. China Production Possibilities Product A Apparel Chemicals (tons) 120,000 96,000 72,000 48,000 24,000 24 48 72 96 120 U.S. Production Possibilities Product R. W Apparel Chemicals(tons) 40,000 32,000 24,000 16,0000 8,000 16 32 48 64 80 Instructions: Enter your answers as whole numbers. a. Are comparative-cost conditions such that the two countries should specialize? Yes If so, what product should each produce? China should produce apparel O The United States should produce chemicals b. What is the total gain in apparel and chemical output that would result from such specialization? Apparel: 224000 8 units Chemicals: 144 8 ton(s) c. What are the limits of the terms of trade? 1000 O units of apparel for 1 ton of chemicals and 1000 O units of apparel for 2 tons of chemicals.
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