Wool Coal New Zealand 30 24 |40 40 Australia New Zealand has access to 500 resources, Australia has access to 400 resources. Under autarky, both countries allocate resources equally between the two goods. Which of the following statements is true if we allow for trade to occur between Australia and New Zealand? O a. Trade will occur as long as the exchange rate for wool is between 1 and 1.25 units of coal. O b. Trade will occur as long as the exchange rate for coal is between 1.33 and 1.67 units of wool. Oc. Trade will occur as long as the exchange rate for coal is between 1 and 1.25 units of wool. O d. Trade will occur as long as the exchange rate for wool is between 1.33 and 1.67 units of coal.
Wool Coal New Zealand 30 24 |40 40 Australia New Zealand has access to 500 resources, Australia has access to 400 resources. Under autarky, both countries allocate resources equally between the two goods. Which of the following statements is true if we allow for trade to occur between Australia and New Zealand? O a. Trade will occur as long as the exchange rate for wool is between 1 and 1.25 units of coal. O b. Trade will occur as long as the exchange rate for coal is between 1.33 and 1.67 units of wool. Oc. Trade will occur as long as the exchange rate for coal is between 1 and 1.25 units of wool. O d. Trade will occur as long as the exchange rate for wool is between 1.33 and 1.67 units of coal.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The world economy consists of two countries, Australia and New Zealand. Both countries produce two goods, wool and coal.
You are given the following production costs (resources required) for this economy:
Wool Coal
New Zealand 30 24
40 40
Australia
New Zealand has access to 500 resources, Australia has access to 400 resources.
Under autarky, both countries allocate resources equally between the two goods.
Which of the following statements is true if we allow for trade to occur between Australia and New Zealand?
O a. Trade will occur as long as the exchange rate for wool is between 1 and 1.25 units of coal.
O b. Trade will occur as long as the exchange rate for coal is between 1.33 and 1.67 units of wool.
O. Trade will occur as long as the exchange rate for coal is between 1 and 1.25 units of wool.
O d. Trade will occur as long as the exchange rate for wool is between 1.33 and 1.67 units of coal.
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