Please show work and explain. Thank you 9. The figure given below shows the prod
ID: 1139672 • Letter: P
Question
Please show work and explain. Thank you
9. The figure given below shows the production-possibility curves of Canada (AB) and the Rest of the World (CD). The pre-trade price ratio in Canada and the Rest of the World are given by the lines P1 and P3 respectively. The international price ratio faced by the countries is represented by the line P2. l-1 and 12 are the pre-trade and post-trade social indifference curves for both Canada and the Rest of the World respectively. In the absence of trade, Canada consumes bushels of wheat. bales of cotton and_ Wheat (bushels) Wheat (bushels) 16. 10 12 16 20 Cotton (baks) 0 4 812 Cotton (bakes) a. 20; 3 b. 16; 6 c. 20; 6 d. 12; 11 10. In the absence of trade, the Rest of the World producesb ales of cotton and bushels of wheat. a. 10; 8 b. 4; 16 c. 12; 8 d. 8; 10 11. After engaging in free trade, Canada consumes a. b 20; 11 of cotton and bushels of wheat. 12; 11 3; 20 16; 6 d. 12. Before Canada entered into a trade with the rest of the world, the total amount of cotton produced in the world wasbales and the total amount of wheat produced in the world was bushels. 24; 19 24; 16 19; 24 18; 24 a. c. d. 13. As a result of specialization and trade, cotton production in the world increases by bale(s) and wheat production increases by bushel(s). b. d. 0:3 0;1 24;19Explanation / Answer
Answer
9) The correct answer is (b) 16;6
Before Trade canada consumes that at combination at which I1 intersects PPC of Canada Because this is the maximum utility Canada can achieve with there total resources. As we can see that I1 intersects PPC of Canada at S0 and At S0 Number of cotton bales = 16 and Number of Wheat Bushels = 6.
Hence The correct answer is (b) 16;6
10)
The correct answer is (b) 8;10
Before Trade Rest of the World consumes that combination at which I1 intersects PPC of Rest of the world Because this is the maximum utility Canada can achieve with there total resources. As we can see that I1 intersects PPC of Rest of the world at S2 and At S2 Number of cotton bales = 8 and Number of Wheat Bushels = 10.
Hence The correct answer is (d) 8;10
11) The correct answer is (a) 12;11
Now Terms of Trade = P2 so Now cananda consumes that amount at which this terms of Trade intersects I2. We can see that P2 intersect I2 at C1 and at C1
Number of cotton bales = 12 and Number of Wheat Bushels = 11.
Hence The correct answer is (a) 12;11
12) The correct answer is (b) 24,16
As discussed in 9 and 10, Number of cotton bales = 16 in Cananda and Number of cotton bales = 8 in rest of the world. Hence Total amount of Cotton Produced in the world = 16 + 8 =24.
Number of Wheat Bushels = 6 in Cananda and Number of Wheat Bushels = 10 in rest of the world. Hence Total amount of Wheat Produced in the world = 6 + 10 =16.
Hence the correct answer is (b) 24,16
13) The correct answer is (a) 0;3
After Specialization cotton consumed in Canada = 12 and Cotton consumed in Rest of World(S2) = 12. Hence Total cotton =24.So increase in cotton = 24 - 24 = 0
Wheat consumed in Canada = 11 and Wheat consumed in Rest of World(S2) = 8. Hence Total cotton = 19.So increase in cotton = 19 - 16 = 3
Hence The correct answer is (a) 0;3