The only two countries in the world, Alpha and Omega, face the following production possibilities frontiers.
a. Assume that each country decides to use half of its resources in the production of each good. Show these points on the graphs for each country as point A.
b. If these countries choose not to trade, what would be the total world production of popcorn and peanuts?
c. Now suppose that each country decides to specialize in the good in which each has a comparative advantage. By specializing, what is the total world production of each product now?
d. If each country decides to trade 100 units of popcorn for 100 units of peanuts, show on the graphs the gain each country would receive from trade. Label these points B.
Definitions:
Graph
A visual representation of data designed to communicate information clearly and efficiently.
Frequency Distribution
The organization of raw data in table form, showing how frequently each value in a set of data occurs.
Communicate
The act of conveying information or expressing thoughts and feelings through speech, writing, signals, or other means.
Idea
A thought or suggestion as to a possible course of action, concept, or level of understanding.
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