Essentials of Economics 2nd Edition by Campbell McConnell, Randy Grant, Stanley Brue

تمرين 2

Below are hypothetical production possibilities tables for New Zealand and Spain. Each country can produce apples and plums.
New Zealand's Production Possibilities Table (Millions of Bushels)

Spain's Production Possibilities Table (Millions of Bushels)

Referring to the tables, answer the following:
a. What is each country's cost ratio of producing plums and apples
b. Which nation should specialize in which product
c. Suppose the optimal product mixes before specialization and trade are alternative B in New Zealand and alternative S in Spain and the actual terms of trade are 1 plum for 2 apples. What will be the gains from specialization and trade