Reference no: EM133334877

Assignment:

Suppose both India and Vietnam have 200 total resource units available for production of two goods (the example is not realistic). There are two goods that the two countries produce: Turmeric and Durian.

Initially the two countries do not trade, it takes India 10 units of resources to produce one unit of turmeric and 40 units of resources to produce one unit of durian. Vietnam uses 40 resource units to produce one unit of turmeric and 10 units to produce one unit of durian. Assume no trade.

1. Draw the PPF for each country for turmeric and durian in one graph.

2. Assume each country dedicates one-half of their resource endowment of 200 for each product and they do not trade. How much of the two products can each country produce and consume?

3. Now have Vietnam completely specialize in durian with no production of turmeric. Similarly, have India produce only turmeric with no durian. What is total world production of the two goods?

4. Now, have India and Vietnam trade 6 units of durian for 6 units of turmeric. Explain the increase in consumption of the two products for both countries after specialization and trade.

5. Create two table show the absolute advantage and comparative advantage between two country and two goods.