Explore BrainMass
Share

Explore BrainMass

    Production Possibilities Before and After Trade

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Plot the production possibilities data for each of the two countries separately. Referring to your graphs, answer the following:
    a. What is each country's cost ratio of producing plums and apples.
    b. Which nation should specialize in which product?
    c. Show the trading possibilities lines for each nation if the actual terms of trade are 1 plum for 2 apples. (Plot these lines on your graph.)
    d. Suppose the optimum product mixes before specialization and trade mere alternative B in New Zealand and alternative S in Spain. V/hat would be the gains from specialization and trade?

    See attached file for full problem description.

    © BrainMass Inc. brainmass.com October 9, 2019, 6:52 pm ad1c9bdddf
    https://brainmass.com/economics/production/production-possibilities-before-after-trade-100526

    Attachments

    Solution Preview

    a) See the attached graphs. New Zealand's cost ratio is 1 plum to 4 apples (or 1 apple to 1/4 plum). Spain's cost ratio ...

    Solution Summary

    Production possibilities before and after trade and specialization for two countries are discussed in this solution.

    $2.19