The Only Two Countries in the World, Alpha and Omega

Essay

The only two countries in the world, Alpha and Omega, face the production possibilities frontiers shown.
a. Assume that each country decides to use half of its resources in the production of each good. Show these points on the graphs for each country as point A.
b. If these countries choose not to trade, what will be the total world production of popcorn and peanuts?
c. Now suppose that each country decides to specialise in the good in which each has a comparative advantage. What is the total world production of each product now?
d. If each country decides to trade 100 units of popcorn for 100 units of peanuts, show on the graphs the gain each country will receive from trade. Label these points B.
A.
b. If these countries choose not to trade, what will be the total world production of popcorn and peanuts?
c. Now suppose that each country decides to specialise in the good in which each has a comparative advantage. What is the total world production of each product now?
d. If each country decides to trade 100 units of popcorn for 100 units of peanuts, show on the graphs the gain each country will receive from trade. Label these points
B.