Image text transcribed for accessibility: The production possibilities frontiers in the figure to th1 answer below »

Image text transcribed for accessibility: The production possibilities frontiers in the figure to the right show how many bananas and coconuts you (Y) and your neighbor (N) can consume without trade. Suppose you are initially consuming 5 bananas and 4 coconuts and your neighbor is initially consuming 5 bananas and 5 coconuts. Now, suppose you and your neighbor specialize by each only producing the good for which you have a comparative advantage. You give your neighbor half of your production for half of what he produces. (Enter all responses as integers .) If you trade with your neighbor, then you will have additional coconut(s) after the trade and additional banana(s). At the same time, your neighbor will be able to consume additional banana(s) and will be as a result of trade.

Sep 15 2021 07:49 AM

1 Approved Answer

Vipul M
answered on
September 17, 2021

3
Ratings,(21 Votes)

Home country has comparative advantage in making coconuts as it gives up 4 coconuts for making 1 banana while neighbor gives up 1/5 coconuts to produce 1 banana. Hence, home produces coconuts and neighbor produces bananas. In trade, home gives 12 coconuts...

nd receives 15 bananas. Now home has 12 coconuts (8 additional) and 15 bananas (10 additional) while neighbor has 15 coconuts (10 additional) and 12 bananas (7 additional)

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