Refer to your answers to Problem 32-7 when answering the following questions.
In Refer to Problem 32-7

a. Which one of the following rates of exchange of modems for flash memory drives will be acceptable to both nations: (i) 3 modems for 1 flash drive; (ii) 1 modem for 1 flash drive; or (iii) 1 flash drive for 2.5 modems? Explain.
b. Suppose that each nation decides to use all available resources to produce only the good for which it has a comparative advantage and to engage in trade at the single feasible rate of exchange you identified in part (a). Prior to specialization and trade, residents of South Shore chose to produce and consume 30 modems per hour and 90 flash drives per hour, and residents of East Isle chose to produce and consume 40 modems per hour and 30 flash drives per hour. Now, residents of South Shore agree to export to East Isle the same quantity of South Shore's specialty good that East Isle residents were consuming prior to engaging in international trade. How many units of East Isle's specialty good does South Shore import from East Isle?
c. What is South Shore's hourly consumption of modems and flash drives after the nation specializes and trades with East Isle? What is East Isle's hourly consumption of modems and flash drives after the nation specializes and trades with South Shore?
d. What consumption gains from trade are experienced by South Shore and East Isle?

Transcribed Image Text:

South Shore East Isle Modems FlashDives Modems Flash Drives 75 60 45 30 15 0 0 30 60 20 120 150 100 80 60 40 20 0 0 10 20 30 40 ti0)