Which country would benefit from the trade explain

Reference no: EM13749218

Suppose that in a year an American worker can produce 100 shirts or 20 computers, while a Chinese worker can produce 100 shirts or 10 computers.

a. If the two countries were open to trade, which country would export shirts? Give a specific numerical example. Which country would benefit from the trade? Explain.

b. Explain what price of computers (in terms of shirts) the two countries might trade.

c. Suppose that China catches up with American productivity so that a Chinese worker can produce 100 shirts or 20 computers. What pattern of trade would you predict now? How does this advance in Chinese productivity affect the economic well-being of the citizens of the two countries?

Reference no: EM13749218

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