Ch 5 Global Trade [AP & Reg]

Chilehasacomparativeadvantageinwheatsteelanabsoluteadv

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Unformatted text preview: goods it imports. pays lower 80 – – before trade & specialization– prisoners of their own PPC’s and CPC’s Before trade, I’m a prisoner of my own PPC. C O F 40 F E E 0 CPC [Consumption Possibilities Curve] Haiti Haiti’s Domestic Comparative Cost 1 Bread = 4 Coffees ¼ Bread = 1 Coffee 10 Bread 20 Trade Allo ws Natio ns to Co ns ume Be yo nd The ir Trade PPCs While Pro duc ing On It P PCs Haiti Before trade Before 1B = 4C 1B 100 After Trade Coffee 1B = 5C We are s us pe nding re ality. CPC (after trade) CPC (before trade) (before & after trade) 80 10 breads & 50 coffees 11 breads and 45 coffees 10 breads and 40 coffees 12 breads & 40 coffees 50 45 40 “I’m outa here.” “Now with trade, you can escape your PPC and consume more of both bread and coffee.” “A prisoner of prisoner my own PPC.” my 0 1012 112 1 Bread 20 X 5 Brazil 30 Chile Chile’s DCC costs 2 1 W = __ S ___W = 1S ½ 20 12 Steel 6 1.5 2 0 Wheat 3 4 15 Terms of Trade 3 Steels 1 Wheat= ___ Steels 10 Steel Brazil’s DCC Brazil’s DCC costs 4 1 W = __ S ¼ ___W = 1S 0 5 10 Wheat Wheat World CC 1 Wheat = __ Steels 3 1/3 Wheat = 1 Steel __ 4. Chile has a comparative advantage in (wheat/steel) & an absolute advantage in (wheat/steel/both). Brazil has a compa...
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