Answer to Question #294008 in Economics for maisarah

Question

suppose that in a year an American worker can produce 100 shirts or 20 computers, while a chinese worker can produce 100 shirts or 10 computers

a. graph the production possibilities curve for the two countries. Suppose that without trade the workers in each country spend half their time producing each good. Identify this point in your graph.

b. if these were open to trade, which country would export shirts? Give a specific numerical example and show it on your graph. Which country would benefit from trade? explain.

Answer 1

a. The production possibilities curve for China goes through the points (100;0), (50;5) and (0;10), and for United States (100;0), (50;10) and (0;20).

b. If these countries were open to trade, then China would export shirts and United States would export computers. Both countries would benefit from trade.