4. Now trade happens. (5 pts each) a) Which product is country A likely to export? Why? b) What happens to the price ratio for country A (PC / PB) as a result of trade? Explain. c) Redraw the PPF from part 3 b., above to take into account the start of trade and show how the iso value line has changed due to the change in the price ratio. d) Now redraw the resource box from part 3 a., above to take into account the start of trade. Show how the land/labor ratios have changed in the resource box. Explain why this change would occur.
Added by Angela P.
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In this case, if country A has a comparative advantage in producing computers (PC), it will likely export computers. Show more…
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