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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

Using the data in the accompanying table, answer the following questions:

  1. a. For which good docs Canada have a comparative advantage?
  2. b. For which good docs Italy have a comparative advantage?
  3. c. What might be a set of favorable terms of trade for the two countries?
  4. d. Prove that both countries would be better off in the specialization-trade case than in the no-specialization-no-trade case.

images

(a)

To determine

The good in which Country C has a comparative advantage.

Explanation

Table1 shows the production possibility points of two countries.

Table 1

...

Points on PPF

Country CCountry I
Good XGood YGood XGood Y
A1500900
B100256060
C505030120

(b)

To determine

The good in which Country I has a comparative advantage.

(c)

To determine

The favorable set of terms of trade.

(d)

To determine

The production and consumption of goods X and Y before and after specialization.

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