Question

QUESTION 17 Zimbabwe and South Africa are trading partners. Both produce metal ores (including lithium) and delivery trucks. (Note: The numbers below are fake, but the direction of trade is real!) (Please label your answers using A, B, C, and D.) A) (1 point) As each country increases its production of metal ores, what happens to the opportunity cost of producing metal ores in terms of delivery trucks? B) (3 points) Now suppose that if Zimbabwe uses all of its resources, it can produce 50,000 tons of metal ores or 100,000 delivery trucks (trading off at a constant rate). Suppose that if South Africa uses all of its resources, it can produce 20,000 tons of metal ores or 80,000 delivery trucks (trading off at a constant rate). What is the direction of trade (who exports what to whom)? Be sure to give the opportunity costs of production of both goods for both countries. C) (2 points) What is one potential price of metal ores in terms of trucks at which both Zimbabwe and South Africa would benefit from trade? Rank the autarkic prices and the world price of metal ores from lowest to highest. D) (2 points) Who wins and who loses from the trade in metal ores? ALT+FN+F1n (Mar)

QUESTION 17 Zimbabwe and South Africa are trading partners. Both produce metal ores (including lithium) and delivery trucks. (Note: The numbers below are fake, but the direction of trade is real!) (Please label your answers using A, B, C, and D.) A) (1 point) As each country increases its production of metal ores, what happens to the opportunity cost of producing metal ores in terms of delivery trucks? B) (3 points) Now suppose that if Zimbabwe uses all of its resources, it can produce 50,000 tons of metal ores or 100,000 delivery trucks (trading off at a constant rate). Suppose that if South Africa uses all of its resources, it can produce 20,000 tons of metal ores or 80,000 delivery trucks (trading off at a constant rate). What is the direction of trade (who exports what to whom)? Be sure to give the opportunity costs of production of both goods for both countries. C) (2 points) What is one potential price of metal ores in terms of trucks at which both Zimbabwe and South Africa would benefit from trade? Rank the autarkic prices and the world price of metal ores from lowest to highest. D) (2 points) Who wins and who loses from the trade in metal ores? ALT+FN+F1n (Mar)

Only need the first question to be answered

Answer 1

If both the countries started producing more of metal ore rather the delivery truck, the inventory of the ores will increase causing increase in cost of holding and carrying inventory. Moreover if there is available market for delivery trucks then this situation will also cause Loss of potential revenues from sale of such trucks.