4. If both Country A and Country B produce only the good in which they have a comparative advantage in, how much coffee and tea will exist in Economia? 5. Do gains from specialization and trade exist? Explain why or why not.

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
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Chapter1: Making Economics Decisions
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11:05 PM O Å M
96
Country A
Country B
Coffee
Tea
Coffee
Тea
50 pounds 0 pounds
30 pounds 0 pounds
O pounds 100 pounds 0 pounds 120 pounds
Suppose Country A and Country B are the only
two countries on planet Economia and they
can only produce two goods; coffee and tea.
The tables above describe their different
production possibilities.
1. If both countries do not trade and simply
split their resources equally in the
production of coffee and tea, how much
coffee and tea will exist in Economia?
2. Which country has the lower opportunity
cost in the production of coffee? Which
country has a lower opportunity cost in the
production of tea?
3. If Country A and Country B decide to
specialize in the production of the good in
which they have a comparative advantage
in, which good will Country A produce?
Which good will Country B produce?
4. If both Country A and Country B produce
only the good in which they have a
comparative advantage in, how much
coffee and tea will exist in Economia?
5. Do gains from specialization and trade
exist? Explain why or why not.
Transcribed Image Text:11:05 PM O Å M 96 Country A Country B Coffee Tea Coffee Тea 50 pounds 0 pounds 30 pounds 0 pounds O pounds 100 pounds 0 pounds 120 pounds Suppose Country A and Country B are the only two countries on planet Economia and they can only produce two goods; coffee and tea. The tables above describe their different production possibilities. 1. If both countries do not trade and simply split their resources equally in the production of coffee and tea, how much coffee and tea will exist in Economia? 2. Which country has the lower opportunity cost in the production of coffee? Which country has a lower opportunity cost in the production of tea? 3. If Country A and Country B decide to specialize in the production of the good in which they have a comparative advantage in, which good will Country A produce? Which good will Country B produce? 4. If both Country A and Country B produce only the good in which they have a comparative advantage in, how much coffee and tea will exist in Economia? 5. Do gains from specialization and trade exist? Explain why or why not.
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