Jeffery Walburger module 8

Jeffery Walburger module 8 - Jeffery Walburger Module 8...

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Jeffery Walburger Module 8 Assignment Please place your answers on this sheet where indicated after the question and submit to instructor. 1. The following are production possibilities tables for China and the United States. Assume that before specialization and trade the optimal product-mix for China is alternative B and for the United States alternative U. Product China’s production possibilities Apparel Chemicals A 30 0 B 24 6 C 18 12 D 12 18 E 6 24 F 0 30 Product U.S. production possibilities Apparel Chemicals R 10 0 S 8 4 T 6 8 U 4 12 V 2 16 W 0 20 a. Under comparative advantage what product should each produce? Ans. China Apparel U.S. Chemicals b. What is the total gain in world apparel and chemical output that results from this specialization? Ans. The gain is 2,000 units of apparel and 2 tons of chemicals . c. What are the terms of trade? Ans. 1A = 1C in China and 1A = 2C in the United States. The terms of trade must be somewhere between these two ratios for trade to occur. d. Explain why this illustration allows you to conclude that specialization according to comparative advantage results in more efficient use of world resources?
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