Draw the production possibility frontier of each country

Reference no: EM131060339

Consider the following table about the technology of producing cars and TVs, where labor is the only factor of production:

	1 Car	1 TV
Country 1	20 labor	5 labor
Country 2	50 labor	25 labor

(a) Country 1 has a comparative advantage in :

(b) Country 2 has a comparative advantage in :

(d) The trade price:

(e) Assume that the autarky production is when both countries devote half of their labor to produce each good. Now, suppose that country 1 devotes 40% of their labor to produce cars and 60% to produce TVs, while country 2 devotes 75% of their labor to produce cars and 25% to produce TVs, and then they decide to trade such that the number of cars available for consumption in both countries after trade is the same as in autarky. Complete the following table:

	Country 1		Country 2
	Cars	TVs	Cars	TVs
Autarky
Production & Consumption
Trade
Production
Trade
Consumption
Gains from Trade

Reference no: EM131060339

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