Wheat Wheat China USA Clothing Clothing Sketch a community indifference curve tangent to the fairly flat section of the PPC for China and another community indifference curve to the fairly steep section of the PPC for USA. Draw in the line showing equilibrium – relative commodity price in isolation in each country. Which is the commodity of comparative advantage for: • China • USA Show the direction of specialization in production (with an arrow) for each country. Show an after-trade equilibrium point of production and consumption for each country. How can you tell if both countries have gained from trade?

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