-Refer to Above Figure

question 8

Essay

-Refer to above figure. Albania refused to engage in international trade for ideological reasons. To maximize its economic welfare it would choose to produce at which point in the diagram above?
Suppose the PA/PB at point a was equal to 1. Given this information, in which good (A or
B) does Albania enjoy a comparative advantage?
Now that the Cold War is over, Albania is interested in obtaining economic welfare gains from trade. The relevant international relative price is PA/PB = 2. Albania would therefore choose to produce at which point (a, b, or c)? Given this additional information, in which good does Albania enjoy a comparative advantage?

---

Definitions:

Disclosure Rules

Regulations requiring companies to provide full, fair, and timely disclosure of material information to investors and the public.

Domestic Bonds

Bonds issued by a government or corporation within its own country and usually denominated in the country's own currency.

Trading Floor

The physical or electronic space where traders buy and sell securities, such as stocks or futures, in financial markets.

Foreign Exchange Market

A global decentralized or over-the-counter market for trading currencies, determining the foreign exchange rates for every currency.