Assume that there are two countries in the world, Brazil and India, and they can
ID: 1150541 • Letter: A
Question
Assume that there are two countries in the world, Brazil and India, and they can produce two goods, Coffee and Tea. The following table tells us the maximum amount that each country can produce if they only produce that good (they are the end points of the PPF). Assume that each country has resources that are identical in production.
11. What are the gains from trade?
12. What are the consumption levels after trade? Assume that the two countries split the gains from trade equally.
Coffee Tea Brazil 600 200 India 500 250Explanation / Answer
Both can not be calculated at all by anyone till you give data about initial production and initial consumption. 100% sure about it