Figure: A Country's Before and After Trade Equilibria (Figure: A Country's Before and After Trade Equilibria) What
Are the pretrade quantities of shoes and computers
Produced by this nation?

Question

Figure: A Country's Before and After Trade Equilibria  (Figure: A Country's Before and After Trade Equilibria) What
Are the pretrade quantities of shoes and computers
Produced by this nation?

Quizplus · Accepted Answer

Before trade, the country produces and consumes 225 shoes and 200 computers. The production possibility frontier (PPF) shows that it can produce at most 225 shoes or 200 computers without trade. After trade, the country can consume at point D, which is outside its PPF. This point is reached by exporting 25 shoes and importing 100 computers. By specializing in computer production and trading with another nation that specializes in shoe production, the country can increase its consumption of both goods beyond what is possible without trade. Therefore, the best choice is to specialize in producing computers and trade.

Figure: a Country's Before and After Trade Equilibria (Figure