Question

The following hypothetical production possibilities tables are for China and the United States. Assume that before specialization and trade the optimal product mix for China is alternative B and for the United States is alternative U. China Production Possibilities Product: A - B - C - D - E - F Apparel: 120,000 - 96,000 - 72,000 - 48,000 - 24,0000 Chemicals(tons): 0 - 24 - 48 - 72 - 96 - 120 U.S. Production Possibilities Product: R - S - T - U - V - W Apparel: 40,000 - 32,000 - 24,000 - 16,0000 - 8,0000 Chemicals(tons): 0 - 16 - 32 - 48 - 64 - 80a. Are comparative-cost conditions such that the two countries should specialize?
Yes / No.
If so, what product should each produce?
China should produce chemicals or apparel.
The United States should produce chemicals or apparel?
b. What is the total gain in apparel and chemical output that would result from such specialization?
Apparel: units.
Chemicals: tons.

Answer 1

The following hypothetical production possibilities tables are for China and the United States. Assume that before specialization and trade the optimal product mix for China is alternative B and for the United States is alternative U. China Production Possibilities Product: A - B - C - D - E - F Apparel: 120,000 - 96,000 - 72,000 - 48,000 - 24,0000 Chemicals(tons): 0 - 24 - 48 - 72 - 96 - 120 U.S. Production Possibilities Product: R - S - T - U - V - W Apparel: 40,000 - 32,000 - 24,000 - 16,0000 - 8,0000 Chemicals(tons): 0 - 16 - 32 - 48 - 64 - 80a. Are comparative-cost conditions such that the two countries should specialize?