Suppose the two islands in Problem 4 agree that the terms of trade will be one for
Question:
Suppose the two islands in Problem 4 agree that the terms of trade will be one for one and exchange 10 pearls for 10 pineapples.
(a) If Alpha produced 6 pearls and 15 pineapples while Beta produced 30 pearls and 8 pineapples before they decided to trade, how many pearls would each be producing after trade? Assume that the two countries specialize according to their comparative advantage.
Alpha: __________
Beta: __________
(b) How much would the combined production of pineapples increase for the two islands due to specialization?
(c) How much would the combined production of pearls increase?
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a Alpha 2 pearls Beta 40 pearls b 6 c 6 Feedback a According to the information provided in the orig...View the full answer
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Related Book For 
The Macro Economy Today
ISBN: 978-1259291821
14th edition
Authors: Bradley R. Schiller, Karen Gebhardt
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