Assume that Freeland could produce 8 units of X and no Y, 16 units of Y and

Question:

Assume that Freeland could produce 8 units of X and no Y, 16 units of Y and no X, or any linear combination in between, and Braveburg could produce 32 units of X and no Y, 48 units of Y and no X, or any linear combination in between.
a. What is the of producing X in Freeland? In Braveburg?
b. If Freeland and Braveburg specialize according to comparative advantage, which directions will goods flow in trade?
c. If trade occurs, what will the terms of trade between X and Y be?
d. How large would transactions costs, transportation costs, or tariffs have to be to eliminate trade between Freeland and Braveburg?

Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...