Ireland and Japan are assumed to produce only wool and steel, to have full employment and complete mobility of resources. Their production possibilities boundaries before trade are drawn in solid lines. It is assumed that the two countries have the same amount of resources. Their consumption possibilities after trade are shown by the dotted line. The outputs of wool and steel are given in physical units. FIGURE 33- 1
-Refer to Figure 33- 1. At the "terms of trade" shown by the dotted lines,

Question

Ireland and Japan are assumed to produce only wool and steel, to have full employment and complete mobility of resources. Their production possibilities boundaries before trade are drawn in solid lines. It is assumed that the two countries have the same amount of resources. Their consumption possibilities after trade are shown by the dotted line. The outputs of wool and steel are given in physical units.  FIGURE 33- 1
-Refer to Figure 33- 1. At the "terms of trade" shown by the dotted lines,

Quizplus · Accepted Answer

Both countries experience gains from trade as they are now able to consume beyond their production possibilities without increasing their resource allocation. This is represented by the consumption possibilities shown in the dotted line, which lies outside the production possibilities boundaries of both countries.

Ireland and Japan Are Assumed to Produce Only Wool and Steel