Two countries each produce two goods. Country 1 has 200 workers and Country 2 has 600 workers. If they do not trade, Country 1 produces 5 units of good 1 and 1 unit of good ECON 212 Microeconomics II Ayça Tekin-Koru HOMEWORK 1 PAGE 2 2, and Country 2 produces 10 units of good 1 and 10 units of good 2. The following table shows how many workers are necessary to produce each good: Country 1 Country 2 Workers per unit of good 1 20 20 Workers per unit of good 2 100 40 a) In the absence of trade, how many units of goods 1 and 2 can Country 2 produce? How many can Country 1 produce? b) Which country has a comparative advantage in producing good 1? In producing good 2? c) Draw the production possibility for each country and show where the two produce without trade. Put good 1 on vertical axis and good 2 on horizontal axis. d) Draw the production possibility frontier with trade. e) Show that both countries can benefit from trade
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Two countries each produce two goods. Country 1 has 200 workers and Country 2 has 600 workers. If they do not trade, Country 1 produces 5 units of good 1 and 1 unit of good ECON 212
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