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a.) The international flow of goods helps compensate for the international immobility of resources.” Analyze and explain.

1. a.) The international flow of goods helps compensate for the international immobility of resources.” Analyze and explain. 

Answer the next three questions on the basis of the following production possibilities data for Narnia and Somosa. All figures are in thousands of units. 

Narnia production possibilities: 

                              A   B  C  D  E 

Computer chips    80  60 40 20 0 

Fuel injectors       0 20 40  60  80 

Somosa production possibilities: 

                            A  B  C  D  E 

Computer chips 40 30 20 10  0 

Fuel injectors     0  20  40 60 80

b.) If trade occurs between Narnia and Somosa, which nation should export what product? Why?

c.)What are the limits of the terms of trade between Narnia and Somosa?

d.)Assume that prior to specialization and trade, Narnia and Somosa chose production possibility “C.” Now each specializes according to comparative advantage. What will be the resulting gains from trade? Explain your answer. 

Posted in Economics, asked by fifi, 6 years ago. 7738 hits.
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