International Trade & Comparative Advantage: Chapter 32 The following topic show

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International Trade & Comparative Advantage: Chapter 32 The following topic show is possible combinations of hourly outputs of Food and Cloth in France and Italy, the only two countries in the world. In both countries are com tent opportunity costs in production. Sketch (but don't turn in) and describe each country's PPC. How can you tell that in both countries there are constant opportunity costs in production? In France, what it the opportunity cost of producing Food? In France, what u the opportunity cost of producing Cloth? In Italy, what is the opportunity cost of producing Food ' In Italy, what it the opportunity cost of producing Cloth? Which nation has the comparative advantage in producing each good? Why? Which one of the following rates of exchange of Food for Cloth will be acceptable to BOTH nations: 3 Food for 1 Cloth; 1 Food for I Cloth; 0.33 Food for (or 1 F for 3. Explain your choice and why you did not choose the others. Suppose in isolation with no trade. French residents produce and consume 30 Food and 90 Cloth per hour and Italian resident produce and consume 40 Food 30 Cloth What it total world output of Food? Cloth? Now suppose both countries open up to trade and decide to completely specialize. i.e.. each nation decides to use all its resources to produce only the good for which it that the comparative advantage. Now what is world output of Food ' md of Cloth?

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