Midterm1_v1_Fall2013_Solution

D once the productivity is the same in the two

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Unformatted text preview: oduction of computers and China has a comparative advantage in the production of shirts. c) The price of a computer would fall between 5 and 10 shirts. If the price was below 5, the United States would not be willing to export computers because the opportunity cost of a shirt for the United States is 1/5 computer. If the price was greater than 10 shirts, China would not be willing to import computers because (for China) the opportunity cost of a computer is 10 shirts. d) Once the productivity is the same in the two countries, the benefits of trade disappear. Trade is beneficial because it allows countries to exploit their comparative advantage. If China and the United States have exactly the same opportunity cost of producing shirts and computers, th...
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This note was uploaded on 12/17/2013 for the course FILM & TV 106A taught by Professor Kuntz during the Fall '08 term at UCLA.

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