The following graph shows the production possibilities frontier for the imaginary country of Bellissima under conditions of increasing costs. In the absence of trade, the relative cost of rice in Bellissima in terms of computers (or the marginal rate of transformation (MRT) of rice into computers) is shown by the slope of line 11, tangent to the production possibilities frontier at point A. RICE (Bushels) 200 180 160 140 120 100 80 60 40 20 0 2 6 8 10 COMPUTERS B 12 14 16 18 20 Consumption After Trade ? Which of the following most accurately describes Bellissima's economy in the absence of trade? Bellissima produces 156 bushels of rice but consumes only 120 bushels of rice. Bellissima produces 6 computers and 156 bushels of rice. Bellissima produces and consumes 6 computers and 120 bushels of rice.

Suppose that France and Italy both produce wine and cheese. France's opportunity cost of producing a case of cheese is 5 barrels of wine, while Italy's opportunity cost of producing a case of cheese is 10 barrels of wine. By comparing the opportunity cost of producing cheese in the two countries, you can tell that comparative advantage in the production of cheese and has a comparative advantage in the production of wine. Suppose that France and Italy consider trading cheese and wine. France can gain from specialization and trade as long as it receives more than of wine for each case of cheese it exports to Italy. Similarly, Italy can gain from trade as long as it receives of cheese for each barrel of wine it exports to France. more than Based on your answer to the last question, a price ratio between benefit both countries. has a barrels of wine per case of cheese will

Suppose there are two states that do not trade: Iowa and Nebraska. Each state produces the same two goods: corn and wheat. For Iowa the opportunity cost of producing 1 bushel of wheat is 3 bushels of corn. For Nebraska the opportunity cost of producing 1 bushel of corn is 3 bushels of wheat. At present, Iowa produces 20 million bushels of wheat and 120 million bushels of corn, while Nebraska produces 20 million bushels of corn and 120 million bushels of wheat.   a. If each state specialized in their respective comparative advantage:   Iowa would produce  million bushels of corn and  million bushels of wheat.   Nebraska would produce  million bushels of wheat and  million bushels of corn.     Now assume Nebraska trades 120 million bushels of wheat for 120 million bushels of corn. With specialization and this trade, Nebraska will end up with  million bushels of corn and  million bushels of wheat, while Iowa will end up with   million bushels of corn and   million bushels of wheat.   b.…

BASIL (Millions of pounds) The following graph shows the same PPF for Rainier as before, as well as its initial consumption at point A. As you did for Yosemite, place a black point (plus symbol) on the following graph to indicate Rainier's consumption after trade. 64 56 48 PPF 40 32 24 16 8 0 8 16 Rainier 24 32 40 48 56 64 ALMONDS (Millions of pounds) Consumption After Trade ? True or False: Without engaging in international trade, Yosemite and Rainier would not have been able to consume at the after-trade consumption bundles. (Hint: Base this question on the answers you previously entered on this page.) ○ True False

Briefly and intuitively explain why the number of varieties available to consumers after trade opens up between two countries will generally be less than the sum of varieties available in the countries before trade.