Production Alternatives Product A B C D Autos 0 40 80 120 Computers 60 40 20 0 C
ID: 1235693 • Letter: P
Question
Production Alternatives
Product
A
B
C
D
Autos
0
40
80
120
Computers
60
40
20
0
Canada's Production Possibilities Table
Production Alternatives
Product
A'
B'
C'
D’
Autos
0
60
120
180
Computers
120
80
40
0
a.) Since Canada canproduce more of either product than Germany can, is there anyreason for Canada and Germany to engage intrade? Explain.
Yes, because of theconcept of Comparative Advantage, each country can still benefit byproducing more of what they are better at and selling it to theother country.
b.) If theytrade, which country should specialize in which product andwhy?
Canada should specialize incomputers and Germany should specialize in Autos because eachcountry
produces more of thoseproducts than the other country.
c.) If the Germans areconsuming and producing 40 autos and 40 computers before trade andthe Canadians are producing and consuming 60 autos and 80 computersbefore trade, what are the potential gains from trade (if any) interms of additional production of autos and computers for bothcountries combined?
Production Alternatives
Product
A
B
C
D
Autos
0
40
80
120
Computers
60
40
20
0
Explanation / Answer
Since it asks for a comparison from current production to "trading"production for both combined, it saves tons of math. Currently, both are producing a total of 100 autos and 120computers. If Germany specializes in computers, producing 60, and Canada inautos, producing 180, there would be a decrease in output forcomputers and an increase in output for autos. If Germany specializes in autos, producing 120, and Canada incomputers, producing 120, there would be no change in output forcomputers and an increase in output for autos. Since it did not ask to explain your suggestion on which scenariois better, I'll stray from doing that. If you need furtherhelp, just ask.
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