Alpha and Beta, two tiny islands in the Pacific, produce pearls and pineapples. The following production possibilities schedules describe their potential output in tons per year:

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Alpha and Beta, two tiny islands in the Pacific, produce pearls and pineapples. The following production possibilities schedules describe their potential output in tons per year:

Alpha and Beta, two tiny islands in the Pacific, produce pearls and pineapples. The following production possibilities schedules describe their potential output in tons per year:



Instructions: Enter your responses as a whole number.

Suppose Alpha and Beta agree that the terms of trade will be one for one and exchange 10 pearls for 10 pineapples.


a. If Alpha produced 6 pearls and 15 pineapples while Beta produced 30 pearls and 8 pineapples before they decided to trade, how many pearls would each be producing after trade? Assume that the two countries specialize according to their comparative advantage.

(i) Alpha: ______ pearls

(ii) Beta: ______ pearls


b. How much would the combined production of pineapples increase for the two islands due to specialization?

_______pineapples


c. How much would the combined production of pearls increase?

 _______ pearls


d. What is the post-trade consumption for each island?

Alpha consumes _____ pearls and ______ pineapples.

Beta consumes ______ pearls and ______ pineapples.

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Reference no: EM132069492

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