Suppose that Maldonia and Lamponia agree to trade. Each country focuses its resources on producing only the good in which it has a comparative advantage. The countries decide to exchange 24 million pounds of grain for 24 million pounds of sugar. This ratio of goods is known as the price of trade between Maldonia and Lamponia. The following graph shows the same PPF for Maldonia as before, as well as its initial consumption at point A. Place a black point (plus symbol) on the graph to indicate Maldonia's consumption after trade. Note: Dashed drop lines will automatically extend to both axes.
Suppose that Maldonia and Lamponia agree to trade. Each country focuses its resources on producing only the good in which it has a comparative advantage. The countries decide to exchange 24 million pounds of grain for 24 million pounds of sugar. This ratio of goods is known as the price of trade between Maldonia and Lamponia. The following graph shows the same PPF for Maldonia as before, as well as its initial consumption at point A. Place a black point (plus symbol) on the graph to indicate Maldonia's consumption after trade. Note: Dashed drop lines will automatically extend to both axes.
Chapter28: International Trade And Finance
Section: Chapter Questions
Problem 1SQP
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Maldonia and lamponias consumption after trade on the graph!
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