Suppose that Maldonia and Desonia agree to trade. Each country focuses its resources on producing only the good in which it has a comparative advantage. Maldonia has a comparative advantage in the production of grain. The countries decide to exchange 4 million pounds of grain for 4 million pounds of tea. This ratio of goods is known as the terms of trade between Maldonia and Desonia. The following graph shows the PPF for Maldonia, as well as its initial consumption at point A. Place a black point (cross symbol) on the graph to indicate Maldonia's consumption after trade. Note: Dashed drop lines will automatically extend to both axes. TEA (Milons of pounds) 9 H 2 R 0 PPF 2 4 Maldonia 6 B 10 GRAIN (Millions of pounds) After trade, Maldonia consumes 12 14 10 million pounds of grain as well as Consumption After Trade million pounds of tea.
Suppose that Maldonia and Desonia agree to trade. Each country focuses its resources on producing only the good in which it has a comparative advantage. Maldonia has a comparative advantage in the production of grain. The countries decide to exchange 4 million pounds of grain for 4 million pounds of tea. This ratio of goods is known as the terms of trade between Maldonia and Desonia. The following graph shows the PPF for Maldonia, as well as its initial consumption at point A. Place a black point (cross symbol) on the graph to indicate Maldonia's consumption after trade. Note: Dashed drop lines will automatically extend to both axes. TEA (Milons of pounds) 9 H 2 R 0 PPF 2 4 Maldonia 6 B 10 GRAIN (Millions of pounds) After trade, Maldonia consumes 12 14 10 million pounds of grain as well as Consumption After Trade million pounds of tea.
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter19: International Trade
Section: Chapter Questions
Problem 3QFR
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Transcribed Image Text:Suppose that Maldonia and Desonia agree to trade. Each country focuses its resources on producing only the good in which it has a comparative
advantage. Maldonia has a comparative advantage in the production of grain.
The countries decide to exchange 4 million pounds of grain for 4 million pounds of tea. This ratio of goods is known as the terms of trade between
Maldonia and Desonia.
The following graph shows the PPF for Maldonia, as well as its initial consumption at point A.
Place a black point (cross symbol) on the graph to indicate Maldonia's consumption after trade.
Note: Dashed drop lines will automatically extend to both axes.
TEA (Mions of pounds)
A
2
a
0
PPF
2
4
Maldonia
6
B
10
GRAIN (Millions of pounds)
After trade, Maldonia consumes
12
14
10
million pounds of grain as well as
Consumption After Trade
million pounds of tea.
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