The opportunity costs could be computed as:AircraftCorn=1/500=0.002 airBeta=500/1=500 corncraft=2/300=0.0067 aiGamma=300/2=150 cornrcraftBeta: 1 Aircraft=500 corn, 1 corn=0.002 aircraftGamma: Aircraft=150 corn, 1 corn=0.0067 aircraft If these two nations trade, what good should each specialize in and export to the other?What would be the range for the terms of trade (price of aircraft in terms of corn, forexample) that would make both nations benefit economically from trade?

1. Beta is specialized in Corn production because its opportunity cost is lower than Gamma in the…

Answered: The opportunity costs could be computed…

The opportunity costs could be computed as: Aircraft Corn =1/500=0.002 air Beta =500/1=500 corn craft =2/300=0.0067 ai Gamma =300/2=150 corn rcraft

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The opportunity costs could be computed as:
Aircraft
Corn
=1/500=0.002 air
Beta
=500/1=500 corn
craft
=2/300=0.0067 ai
Gamma
=300/2=150 corn
rcraft
Beta: 1 Aircraft=500 corn, 1 corn=0.002 aircraft
Gamma: Aircraft=150 corn, 1 corn=0.0067 aircraft

If these two nations trade, what good should each specialize in and export to the other?
What would be the range for the terms of trade (price of aircraft in terms of corn, for
example) that would make both nations benefit economically from trade?

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