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Macroeconomics 1st Edition by Dean Karlan,Jonathan Morduch
Edition 1ISBN: 978-0077332648Macroeconomics 1st Edition by Dean Karlan,Jonathan Morduch
Edition 1ISBN: 978-0077332648 Exercise 22
The Dominican Republic and Nicaragua both produce coffee and rum. The Dominican Republic can produce 20 thousand tons of coffee per year or 10 thousand barrels of rum. Nicaragua can produce 30 thousand tons of coffee per year or 5 thousand barrels of rum.
a. Suppose the Dominican Republic and Nicaragua sign a trade agreement in which each country would specialize in the production of either coffee or rum. Which country should specialize in coffee? Which country should specialize in producing rum?
b. What are the minimum and maximum prices at which these countries will trade coffee?
a. Suppose the Dominican Republic and Nicaragua sign a trade agreement in which each country would specialize in the production of either coffee or rum. Which country should specialize in coffee? Which country should specialize in producing rum?
b. What are the minimum and maximum prices at which these countries will trade coffee?
Explanation
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Production possibility frontier:
It is ...
Macroeconomics 1st Edition by Dean Karlan,Jonathan Morduch
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