The production of shoes and shirts of one worker in country…
Questions
The prоductiоn оf shoes аnd shirts of one worker in country A аnd in country B is shown below: Suppose thаt before trade (or without trade) each country has 10 workers and they each allocate 5 workers for the production of shoes and 5 workers for the production of shirts. Complete the table below finding the maximum production and consumption of both goods for each country (show your work!): Maximum consumption and production before trade Country Shoes Shirts A [option1] [option2] B [option3] [option4] If the countries decide to engage in trade (with trade), they will specialize in the production of the good in which they have comparative advantage. To find out this, we calculate the opportunity costs: Opportunity Costs Country Shoes Shirts A [option5] [option6] B [option7] [option8] Based on the opportunity costs, and hence, comparative advantage, Country A will specialize in the production of [option9], whereas country B will specialize in the production of [option10]. Given that each country has 10 workers: Maximum production with trade Country Shoes Shirts A [option11] [option12] B [option13] [option14] If the countries decide to engage in trade the TERMS-OF-TRADE will be set at 20 shoes for 17 shirts. With this information complete the tables below: Gains from trade for country A Country A Produce Consume Gains from Trade Shoes [option15] [option16] [option17] Shirts [option18] [option19] [option20] Gains from Trade for Country B Country B Produce Consume Gains from Trade Shoes [option21] [option22] [option23] Shirts [option24] [option25] [option26]