The production possibilities frontier (PPF) for Honduras and Brazil, representing hypothetical levels of production, are shown in the graphs. Assume that, without trade, each country is initially producing and consuming at point A on its PPF curve.Suppose these countries decide to trade. Each country will specialize in the production of the good for which it has a comparative advantage.Assume the countries agree to trade. The terms of trade are 6000 tons of bananas for 4000 tons of steel. Move the post‑trade consumption point for each country to reflect their post‑trade consumption.Which good will each country produce?Honduras will produce bananas and Brazil will produce steel.Brazil will produce both bananas and steel.Honduras will produce both bananas and steel.Honduras will produce steel and Brazil will produce bananas. **Graph Title: Trade Consumption in Honduras and Brazil**The image consists of two separate graphs that illustrate the production possibilities and post-trade consumption for Honduras and Brazil for two goods: steel and bananas.**Graph 1: Honduras**- **Axes:** - X-axis: Steel (thousand tons) ranging from 0 to 10. - Y-axis: Bananas (thousand tons) ranging from 0 to 10.- **Line Description:** - A green downward-sloping line represents the production possibility frontier for Honduras, indicating the trade-off between steel and bananas production.- **Points:** - Point A (green) is located at about 2 thousand tons of steel and 4.5 thousand tons of bananas. - A labeled point “post-trade consumption” (orange) is at 5.5 thousand tons of steel and 8 thousand tons of bananas, indicating an increase in consumption due to trade.**Graph 2: Brazil**- **Axes:** - X-axis: Steel (thousand tons) ranging from 0 to 10. - Y-axis: Bananas (thousand tons) ranging from 0 to 10.- **Line Description:** - A red downward-sloping line represents the production possibility frontier for Brazil, also showing a trade-off between steel and bananas production.- **Points:** - Point A (red) is located at approximately 7.5 thousand tons of steel and 3.5 thousand tons of bananas. - A labeled point “post-trade consumption” (purple) is at about 6 thousand tons of steel and 8.5 thousand tons of bananas, demonstrating an increase in consumption due to trade.**Summary:**These graphs depict how the two countries, Honduras and Brazil, can benefit from trade by specializing in the production of goods they are relatively more efficient at producing and then trading to improve their consumption levels, as illustrated by the post-trade consumption points.

(a) To get to the post trade consumption,

Answered: The production possibilities frontier…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The production possibilities frontier (PPF) for Honduras and Brazil, representing hypothetical levels of production, are shown in the graphs. Assume that, without trade, each country is initially producing and consuming at point A on its PPF curve.

Suppose these countries decide to trade. Each country will specialize in the production of the good for which it has a comparative advantage.

Assume the countries agree to trade. The terms of trade are 6000 tons of bananas for 4000 tons of steel. Move the post‑trade consumption point for each country to reflect their post‑trade consumption.

Which good will each country produce?

Honduras will produce bananas and Brazil will produce steel.

Brazil will produce both bananas and steel.

Honduras will produce both bananas and steel.

Honduras will produce steel and Brazil will produce bananas.

**Graph Title: Trade Consumption in Honduras and Brazil**

The image consists of two separate graphs that illustrate the production possibilities and post-trade consumption for Honduras and Brazil for two goods: steel and bananas.

**Graph 1: Honduras**

- **Axes:**
- X-axis: Steel (thousand tons) ranging from 0 to 10.
- Y-axis: Bananas (thousand tons) ranging from 0 to 10.

- **Line Description:**
- A green downward-sloping line represents the production possibility frontier for Honduras, indicating the trade-off between steel and bananas production.

- **Points:**
- Point A (green) is located at about 2 thousand tons of steel and 4.5 thousand tons of bananas.
- A labeled point “post-trade consumption” (orange) is at 5.5 thousand tons of steel and 8 thousand tons of bananas, indicating an increase in consumption due to trade.

**Graph 2: Brazil**

- **Axes:**
- X-axis: Steel (thousand tons) ranging from 0 to 10.
- Y-axis: Bananas (thousand tons) ranging from 0 to 10.

- **Line Description:**
- A red downward-sloping line represents the production possibility frontier for Brazil, also showing a trade-off between steel and bananas production.

- **Points:**
- Point A (red) is located at approximately 7.5 thousand tons of steel and 3.5 thousand tons of bananas.
- A labeled point “post-trade consumption” (purple) is at about 6 thousand tons of steel and 8.5 thousand tons of bananas, demonstrating an increase in consumption due to trade.

**Summary:**

These graphs depict how the two countries, Honduras and Brazil, can benefit from trade by specializing in the production of goods they are relatively more efficient at producing and then trading to improve their consumption levels, as illustrated by the post-trade consumption points.

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