Answer to Question #160934 in Microeconomics for Paula Feldman

Question

2. There are two nations: WallStreetBets and MuskMoonStonks. They produce two goods: silver and Melvin Capital tears. In a single year, WallStreetBets can make 4,000 tons of silver, or 26,000 tons of Melvin tears. In the same period of time, MuskMoonStonks can make 16,000 tons of silver, or 20,000 tons of Melvin tears. In the following questions, be sure to explain your reasoning. (a) Which country has absolute advantage in silver? (3%) (b) Which country has absolute advantage in Melvin tears? (3%) (c) Which country has comparative advantage in silver? (3%) (d) Which country has comparative advantage in Melvin tears? (3%) (e) Suppose that neither country is involved in international trade. In a single year, WallStreetBets makes 2,000 tons of silver and 13,000 tons of tears. In the same period of time, MuskMoonStonks makes 16,000 tons of silver and zero Melvin tears. Depict these allocations on two separate PPFs, one for each nation. (8%) (f) Suppose that the nations now decide to trade. WallStreetBets gives 1,000 tons of Melvin tears to MuskMoonStonks in exchange for 1,000 tons of silver. Is this a 1 beneficial trade for both nations? (10%)

ONLY NEED HELP WITH E AND F

Answer 1

(e) These allocations will be situated in thre PPFs, thte first point in the middle of the curve, and the second point in the start point of the curve.

(f) WallStreetBets gives 1,000 tons of Melvin tears to MuskMoonStonks in exchange for 1,000 tons of silver, then this is a beneficial trade for WallStreetBets only.