Consider the no-trade input/output situation presented in the following table and graph for countries A and B.Assuming that free trade is legal; develop a scenario that will benefit the citizens of both countries.
Input/Output without Trade
| country | |||
| A | B | totoal | |
| I. total potintal output | |||
| (lbs. or yard; 000,000s) | |||
| food | 600 | 500 | 1,100 |
| textiles | 1,200 | 500 | 1,700 |
| II. consumption | |||
| (lbs. or yard; 000,000s) | |||
| food | 300 | 400 | 700 |
| textiles | 200 | 400 | 600 |
A) Country B should make all the textiles and trade with Country A for food.
B) Country A should make nothing but textiles and trade with Country B for food.
C) Country B should make all the textiles and Country A should make all the food.
D) Country B should make nothing but textiles and trade with Country A for food.
Correct Answer:
Verified
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