Given one year production of the two countries are
Shirt | Computers | |
America | 80 | 20 |
China | 60 | 20 |
If both countries using their student with one months time then
Shirt | Computers | |
---|---|---|
America | 80 mn | 20 mn |
China | 60 mn | 20 mn |
Now calculate opportunity cost
1 unit of Shirt | 1 unit of computers | |
---|---|---|
America | 0.25 Computer | 4 units of shirt |
China | 0.33 computer | 3 units of shirt |
America should produce only shirt while china should produce only computers.
If countries were open to trade America should export shirt and China would benefit from Trade.
Highest price = 3 shirts per computers.
Lowest price = 0.25 computers per shirt.
When both countries efficiency is same then none of the countries would get benefited.
True.
I cannot use you interactive tool so it i am attaching the picture below for your reference
The points on the PPF represents the current consumption of both the countries.
Please contact if having any query thank you .
US-China PPF 25 20 o 10 5 0 0 20 40 60 80 100 Shirts
Suppose that in a year an American worker can produce 80 shirts or 20 computers and...
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