Ireland and Japan are assumed to produce only wool and steel,to have full employment and complete mobility of resources between industries.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 lines.The outputs of wool and steel are given in physical units. FIGURE 32-1
-Refer to Figure 32-1.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 between industries.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 lines.The outputs of wool and steel are given in physical units.  FIGURE 32-1
-Refer to Figure 32-1.At the "terms of trade" shown by the dotted lines,

Quizplus · Accepted Answer

Both countries can experience gains from trade at the terms of trade shown by the dotted lines. Japan can specialize in producing steel and export it to Ireland, while Ireland can specialize in producing wool and export it to Japan. This will increase the total output of both countries and allow them to consume a combination of wool and steel that is beyond their production possibilities boundary before trade. Therefore, both countries can benefit from trade at the given terms of trade.

Ireland and Japan Are Assumed to Produce Only Wool and Steel,to