Specialized production points to reflect new output levels

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Reference no: EM131174594

The nations of Utopia and Paradise both produce popcorn and cola. They currently do not trade. Below are the Production Possibilities Frontiers for both countries, with current production levels marked by the blue point labeled \"No Trade.\" Note that the no trade point for Paradise is (6.00 cola, 6.25 popcorn) and the no trade point for Utopia is (4.25 cola, 3.00 popcorn). Use this information to answer the three questions below. Paradise Utopia

1. Utopia and Paradise both decide to specialize in one product and trade for the other. Move the green \"Specialized Production\" points to reflect their new output levels. 2. Which of these prices, or terms of trade, will allow both countries to gain from trade?

3. Utopia decides to sell half of its production to Paradise at this trading price. Move the \"With Trade\" points to the combination of popcorn and cola each country will be able to consume after trade.

Reference no: EM131174594

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