TRADE

[rohan]

trade.png
sir posted this ques a while ago..solve this...i know the ans..i need the working ..

[laracroft]

hey, could u post the answer ?? I couldn't understand how to frame the production fx.

[rohan]

Situation: Autartky,
For country A, optimal consumption and production: (12, 6)
For country B, optimal consumption and production: (10, 4)

For the second part:
Situation: Free trade,
For country A, optimal consumption: (12, 6), optimal production: (2, 11)
For country B, optimal consumption: (10, 5), optimal production: (20, 0)
The price ratio at which goods are traded: p(1)/p(2) = 1/2.
Country A doesn't gain from trade. Country B does.

[laracroft]

Hey

first part is direct.
i cant get the complete solution for the second part...
According to the figures, B should produce good 1 and A should specialise in good 2 BUT acc. to solution... B specialises while A does not..

Kindly let me know if u figure out any way to get through this one? !

[MADHAVI KAPOOR]

in pre trade situation..A has and opp cost of 2 in producing good 1 while B has 2.5 ... so..country A shud specialise in d production of good1

[Ayushya Kaul]

Bump.
Can anyone help out?
I can't figure out the production function!

[Sumit]

hey rohan,
how you did second part????

[Sumit]

@duck could you solve part second for me?????...

[Ayushya Kaul]

Could anyone show their working for this question?