QUESIIUN 48 2 points Save Answer You are the Minister of Tra

QUESIIUN 48 2 points Save Answer You are the Minister of Trade for a small island country in the South Pacific with the following monthly production possibilities curve: 50 100 150 200 250 300 350 400 mas You are negotiating a deal with a neighboring island that has the following monthly PPC: 50 1001 200 250 300 350 400 puu Refer to the graphs above. Both countries specialize exclusively in the product for which they have a comparative advantage. You have agreed to sell them 160 bottles of lemonade in exchange for 100 pizzas. After the trade, your country has a total of lemonade and bottles of OA 240: 100. B. 400:100. ? ?. 400, 200. D. 160; 200

Solution

From above graph, we can see that if your country stop producing 100 pizza, it can produce 200 more lemonade.
Total production of lemonade will be 600(400+200) and 100 pizza.
Now your country exchange 160 lemonade for 100 pizza.
Hence after trade your country will have 440(600-160) lemonade and 200 (100+100) pizzas.
Answer: C 440;200

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