Consider the data in the table to the right. Would U.S. residents gain from the
ID: 1156131 • Letter: C
Question
Consider the data in the table to the right. Would U.S. residents gain from the trade of U.S. tablets for Indian apps if the rate of exchange of tablet devices for digital apps happened to be 3 tablets per? app?
The opportunity cost of apps in the United States without trade is ___tablets per app.? Thus, U.S. residents will not gain from trading U.S. tablets for Indian apps at a rate of exchange of 3 tablets per? app, because if they did export? tablets, they would have to give up___more tablets for each app they import. ?(Enter your responses rounded to two decimal? places.)
Product
United States
India
Digital Apps
92
108
Tablet Devices
205
57
Product
United States
India
Digital Apps
92
108
Tablet Devices
205
57
Explanation / Answer
United States can produce 92 digital apps and 205 tablet devices.
So,
The opportunity cost of producing 1 app is (205/92) 2.22 tablets.
This means that United States can itself produce 1 more app by giving up production of 2.22 tablet devices.
In such scenario, if exchange rate is 3 tablets per app then this will not be beneficial for United States as it would have to give up more tablets per app with trade then it can give up to produce apps domestically.
So, trade will not be beneficial for United States.
Thus,
The opportunity cost of apps in the United States without trade is 2.22 tablets per app.
Thus, US residents will not gain from trading US tablets for indian apps at a rate of exchange of 3 tablets per app, because if they did export tablets, they would have to give up 0.78 more tablets for each app they import.