Question

The United States will have 0 additional shirt(s) after the trade (enter a numeric response using an integer) and __ additional boot(s).

Homework: Homework Assignment 1 Save Score: 0.57 of 1 pt 12 of 19 (12 complete) HW Score: 60.9%, 11.57 of 19 pts % End of Chapter 2.4 :3Question Help • Using the same amount of resources, the United States and Canada can both produce lumberjack shirts and lumberjack boots, as shown in the production possibilities frontiers in the figure to the right. o o PPFU.S. Canada has a comparative advantage in producing lumberjack boots. The United States has a comparative advantage in producing lumberjack shirts. Does either country have an absolute advantage in producing both goods? Quantity of shirts made US O A. Canada has an absolute advantage in both goods because it can produce more boots and more shirts. O B. Both countries have an absolute advantage in both goods because they both produce boots and shirts. O c. The United States has an absolute advantage in both goods because it can produce more boots and more shirts. OD. Neither country has an absolute advantage in both goods because the United States can produce more boots but Canada can produce more shirts. E. Neither country has an absolute advantage in both goods because Canada can produce more boots but the United States can produce more shirts. PPF Canada 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 Quantity of boots made Suppose initially that the United States is consuming 2 boots and 18 shirts and Canada is consuming 12 boots and 4 shirts, as indicated in the figure. Then, suppose the United States and Canada specialize by each only producing the good for which they have a comparative advantage and then trade. In particular, suppose the United States trades Canada half of its production for half of what Canada produces. The United States will have 0 additional shirt(s) after the trade (enter a numeric response using an integer) and additional boot(s). Enter your answer in the answer box and then click Check Answer. parts 2 remaining Clear All Final Check

At the same time, Canada will be able to consume ___ additional shirt(s) as a result of the trade and ___ additional boot(s).

Answer 1

US would specialize in the production of shirts and Canada would specialize in the production of boots according to their comparative advantage. So, US will produce 36 units of shirts and Canada will produce 36 units of boots.

When US trades half of its production for half of what Canada produces- US will trade 18 units of boots for 18 units of shirts and Canada will trade 18 units of shirts for 18 units of boots.

So, US has 18 boots and 18 shirts.

Canada has 18 boots and 18 shirts.

The United States will have 0 additional shirt(s) after the trade (enter a numeric response using an integer) and 16 (18-2) additional boot(s).

At the same time, Canada will be able to consume 14 (18-4) additional shirt(s) as a result of the trade and 6 additional boot(s).