Problem XXXXXXXXXXalgo) The following hypothetical production possibilities tables are for China and the United States. Assume that before specialization and trade the optimal product mix for China is...


Problem 20-03 (algo)



The following hypothetical production possibilities tables are for China and the United States. Assume that before specialization and trade the optimal product mix for China is alternative D and for the United States is alternative S.







































China Production Possibilities

Product

A

B

C

D

E

F
Apparel20,00016,00012,0008,0004,0000
Chemicals(tons)0816243240






































U.S. Production Possibilities

Product

R

S

T

U

V

W
Apparel60,00048,00036,00024,000012,0000
Chemicals(tons)01224364860






Instructions:
Enter your answers as whole numbers.



a. Are comparative-cost conditions such that the two countries should specialize?







     If so, what product should each produce?



     China should produce


.



     The United States should produce


.



b. What is the total gain in apparel and chemical output that would result from such specialization?



    Apparel:  units



    Chemicals:  ton(s)



c. What are the limits of the terms of trade?



     units of apparel for 1 ton of chemicals and units of apparel for 2 tons of chemicals.



Suppose that the actual terms of trade are 1,000 units of apparel for 1½ tons of chemicals and that 8,000 units of apparel are exchanged for 12 tons of chemicals. What are the gains from specialization and trade for each nation?




has a gain of units of apparel.




has a gain of ton(s) of chemicals.



Jun 09, 2022
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