ECON 2306 9 Trade

Supposetheswissiescurrentlyconsume

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Unformatted text preview: oduct enjoyed by one country over another when it uses fewer resources to produce than the other country does. 27 27 Trade – Gillies and Swissies Suppose there exists a tribe of natives on Gilligan’s Island called the Gillies. Suppose there also exists a tribe of natives on Swiss Family Robinson’s island called the Swissies. The two tribes both cut logs for fire and gather nuts for food. 28 28 Trade ­ Gillies and Swissies Suppose the two tribes’ production information for cutting logs & gathering nuts is below: Tribes # of logs cut in a day # of barrels of nuts collected in a day Gillies 10 5 Swissies 6 2 29 29 Trade ­ Gillies and Swissies Will it benefit the Gillies to trade with the Swissies? – YES!!!!!!!!!!!!!!! Gillies opportunity cost to cut 10 logs is 5 barrels of nuts or the opportunity cost to cut 2 logs is 1 barrel of nuts. Swissies opportunity cost to cut 6 logs is 2 barrels of nuts or the opportunity cost to cut 3 logs is 1 barrel of nuts. 30 30 Trade ­ Gillies and Swissies Suppose the Gillies currently consume 6 logs and 2 barrels of nuts. Suppose the Swissies currently consume 3 logs and 1 barrel of nuts. So the total economy consumes 9 cut logs and 3 barrels of nuts. 31 31 Trade – Gillies and Swissies The Production Possibility Frontiers are as follows: Logs Cut 10 Gillies PPF Gillies Current Consumption 6 Swissies PPF 3 Swi...
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