The following hypothetical production possibilities tables for China and Canada. Assume that, before specialization and trade, the optimal product mix for China is alternative B and for Canada is alternative U. Product Apparel (in thousands) Chemicals (in tons) Product Apparel (in thousands) Chemicals (in tons) A 120 0 units R 40 0 B 96 24 S 32 16 China Production Possibilities с 72 48 D 48 72 Canada Production Possibilities T 24 32 What are the gains from specialization and trade for each nation? Gain of units of apparel and [ tons of chemicals. U 16 48 E 24 96 V 8 64 F 0 120 a. Are comparative cost conditions such that the two areas should specialize? (Click to select) If so, what product should each produce? China should produce [(Click to select Canada should produce [(Click to select b. What is the total gain in apparel and chemical output that would result from such specialization? Instructions: Enter your responses as whole numbers. Apparel: Chemicals: tons c. What are the limits of the terms of trade? Limits of the terms of trade =[ units of apparel for 1 ton of chemicals and units of apparel for 2 tons of chemicals. Suppose that the actual terms of trade are 1 unit of apparel for 1½ units of chemicals and that 16 units of apparel are exchanged for 24 units of chemicals. W 0 80
The following hypothetical production possibilities tables for China and Canada. Assume that, before specialization and trade, the optimal product mix for China is alternative B and for Canada is alternative U. Product Apparel (in thousands) Chemicals (in tons) Product Apparel (in thousands) Chemicals (in tons) A 120 0 units R 40 0 B 96 24 S 32 16 China Production Possibilities с 72 48 D 48 72 Canada Production Possibilities T 24 32 What are the gains from specialization and trade for each nation? Gain of units of apparel and [ tons of chemicals. U 16 48 E 24 96 V 8 64 F 0 120 a. Are comparative cost conditions such that the two areas should specialize? (Click to select) If so, what product should each produce? China should produce [(Click to select Canada should produce [(Click to select b. What is the total gain in apparel and chemical output that would result from such specialization? Instructions: Enter your responses as whole numbers. Apparel: Chemicals: tons c. What are the limits of the terms of trade? Limits of the terms of trade =[ units of apparel for 1 ton of chemicals and units of apparel for 2 tons of chemicals. Suppose that the actual terms of trade are 1 unit of apparel for 1½ units of chemicals and that 16 units of apparel are exchanged for 24 units of chemicals. W 0 80
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The following hypothetical production possibilities tables for China and Canada. Assume that, before specialization and trade, the
optimal product mix for China is alternative B and for Canada is alternative U.
Product
Apparel (In thousands)
Chemicals (in tons)
A
120
0
units
B
96
24
R
40
0
China Production Possibilities
с
72
48
S
32
16
D
48
72
Canada Production Possibilities
T
24
32
Product
Apparel (in thousands)
Chemicals (In tons)
a. Are comparative cost conditions such that the two areas should specialize?
(Click to select)
If so, what product should each produce?
China should produce (Click to select
Canada should produce [(Click to select
b. What is the total gain in apparel and chemical output that would result from such specialization?
Instructions: Enter your responses as whole numbers.
Apparel:
Chemicals:
tons
c. What are the limits of the terms of trade?
Limits of the terms of trade =
units of apparel for 1 ton of chemicals and
units of apparel for 2 tons of chemicals.
Suppose that the actual terms of trade are 1 unit of apparel for 1½ units of chemicals and that 16 units of apparel are exchanged for 24
units of chemicals.
What are the gains from specialization and trade for each nation?
Gain of
units of apparel and [
tons of chemicals.
U
16
48
E
24
96
V
8
64
F
0
120
W
0
80
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