Suppose that in a year an American worker canproduce 100 shirts or 20 computers and a Chineseworker can produce 100 shirts or 10 computers.a. For each country, graph the productionpossibilities frontier. Suppose that without tradethe workers in each country spend half their timeproducing each good. Identify this point in yourgraphs.b. If these countries were open to trade, whichcountry would export shirts? Give a specificnumerical example and show it on your graphs.Which country would benefit from trade?Explain.c. Explain at what price of computers (in terms ofshirts) the two countries might trade.d. Suppose that China catches up with Americanproductivity so that a Chinese worker canproduce 100 shirts or 20 computers in a year. Whatpattern of trade would you predict now? Howdoes this advance in Chinese productivity affectthe economic well-being of the two countries’citizens?
Suppose that in a year an American worker can
produce 100 shirts or 20 computers and a Chinese
worker can produce 100 shirts or 10 computers.
a. For each country, graph the production
possibilities frontier. Suppose that without trade
the workers in each country spend half their time
producing each good. Identify this point in your
graphs.
b. If these countries were open to trade, which
country would export shirts? Give a specific
numerical example and show it on your graphs.
Which country would benefit from trade?
Explain.
c. Explain at what price of computers (in terms of
shirts) the two countries might trade.
d. Suppose that China catches up with American
productivity so that a Chinese worker can
produce 100 shirts or 20 computers in a year. What
pattern of trade would you predict now? How
does this advance in Chinese productivity affect
the economic well-being of the two countries’
citizens?
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