The table below shows the production of oil and lumber of ONE worker in China and India:rice (in pounds)shirts (unit)CHINA400200INDIA330110a) BEFORE trade (or with no trade), each country has 100 workers, and they allocate the worker for the production of the goods in thefollowing way:China allocates 35 workers in the production of rice, and 65 workers in the production of shirts;India allocates 50 workers in the production of rice and 50 workers in the production of shirts.Find the maximum production and consumption of both goods for each country!b) If the countries decide to engage in trade (WITH TRADE), they will specialize in the production of the good in which they have comparativeadvantage. In which good should China specialize? How about India? JUSTIFY! (To answer this question you must calculate the opportunitycost of each good for both countries and then find the country's comparative advantage). What is the WITH TRADE production of thecountries?c) If the countries decide to engage in trade the TERMS-OF-TRADE will be set at 15,000 pounds of rice for 6,500 shirts. With this informationcomplete the tables below:CHINAProduceConsumeGains from TradericeshirtINDIAProduceConsumeGains from Tradericeshirt

Answer: a. Before the trade, Production is equal to Consumption. It means each country consumes what…

The table below shows the production of oil and lumber of ONE worker in China and India: rice (in pounds) shirts (unit) CHINA 400 200 INDIA 330 110 a) BEFORE trade (or with no trade), each country has 100 workers, and they allocate the worker for the production of the goods in the following way: • China allocates 35 workers in the production of rice, and 65 workers in the production of shirts; India allocates 50 workers in the production of rice and 50 workers in the production of shirts.

The table below shows the production of oil and lumber of ONE worker in China and India: rice (in pounds) shirts (unit) CHINA 400 200 INDIA 330 110 a) BEFORE trade (or with no trade), each country has 100 workers, and they allocate the worker for the production of the goods in the following way: • China allocates 35 workers in the production of rice, and 65 workers in the production of shirts; India allocates 50 workers in the production of rice and 50 workers in the production of shirts.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter18: International Trade And Comparative Advantage

Section: Chapter Questions

Problem 2TY

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