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Suppose that in a year an American worker can produce 60 shirts or 30 computers and...

Suppose that in a year an American worker can produce 60 shirts or 30 computers and a Chinese worker can produce 60 shirts or 12 computers. There are 1 million workers in each country.

Use the blue line (circle symbol) to graph the production possibilities frontier (PPF) for the United States, and use the green line (triangle symbol) to graph the production possibilities frontier for China.

Suppose that without trade the workers in each country spend half their time producing each good.

Use the black point (plus symbol) to indicate this production and consumption point for the United States, and use the grey point (star symbol) to indicate this production and consumption point for China.

If these countries were open to trade, would export shirts and would benefit from trade.

The price of a computer can be expressed in terms of shirts. The highest price for which a computer can be traded that would make both countries better off is shirts per computer, and the lowest price that makes both countries better off is shirts per computer.

Suppose that China catches up with American productivity so that a Chinese worker can produce 60 shirts or 30 computers.

True or False: There are no longer gains from trade.

True

False

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Answer #1 ✔ Recommended Answer

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3 o tihe tue 12. 6 Chinas RPF 30 Shi IS

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