http://tinypic.com/view.php?pic=2nvav7c&s=5 16. In the table above, if trade wer

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http://tinypic.com/view.php?pic=2nvav7c&s=5

16. In the table above, if trade were to occur, which of the following is true?

a. Country X should export sugar to country Y, and country Y should export coffee to country X.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

b. Country X should export coffee to country Y, and country Y should export sugar to country X.

c. Country Y should export sugar and coffee to country X.

d. Country X should export coffee to country Y, but the two countries should not exchange sugar.

e. Country X should export sugar and coffee to country Y.

17. In the table above, if trade were to occur, what is the most country Y is willing to pay for 1 unit of sugar?

a. 1/2 unit of coffee
b. 3/2 units of coffee
c. 2/3 unit of coffee
d. 1 unit of coffee
e. 150 units of coffee

18. In the table above, assume that before specialization and trade, both countries were producing at production possibility C. Now if each country specializes according to comparative advantage, what will be the gains from trade?

a. 20 units of coffee and 10 units of sugar
b. 20 units of sugar and 10 units of coffee
c. 10 units of sugar
d. 80 units of coffee and 90 units of sugar
e. 20 units of coffee

Explanation / Answer

A, B, B

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