8. Suppose that the resource base in Country X can produce either 150 units of a

Question

8. Suppose that the resource base in Country X can produce either 150 units of alpha or 400 units of beta. Similarly, suppose that Country Y's resource base is capable of producing 150 units of alpha or 300 betas. The opportunity cost of 150 alphas is lower in Country Based on this result, it would be best for Country Y to concentrate on good 9. Using information from questions 8, complete the following table to reveal the changes in production if country X stops producing alphas while country Y shifts resources out of its beta industry to concentrate on alphas Hypothetical changes in Production units of alpha units of beta Country X Country Y

Explanation / Answer

8. The opportunity cost of alpha is lower in country Y because it has to forgo only 150units of beta to produce alpha while country X has to forgo 250units of beta to produce 150 alpha.

9. Country X: Alpha- 0 Beta- 550(400+150borrowed from alpha)

Country B: Alpha- 300(produces 150 of Country X too) Beta- 150(300-150opportunity of producing alpha only)

Although this may change dependng upon factor endowments and the predominant trade policies of the countries.

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