The table below shows the production of TVs and laptops of o…
The table below shows the production of TVs and laptops of one worker in China and Mexico: One worker can produce TV Laptop China 4 1 Mexico 1 2 Suppose that before trade (or without trade) each country has 100 workers and they each allocate 60 workers for the production of TVs and 40 workers for the production of laptops. Find the maximum production and consumption of both goods for each country. If the countries decide to engage in trade (with trade), they will specialize in the production of the good in which they have comparative advantage. In which good should China specialize? How about Mexico? Justify! (To answer this question you must calculate the opportunity cost of each good for both countries and then find the country’s comparative advantage). What is the with trade production of the countries? If the countries decide to engage in trade the terms-of-trade will be set at 80 laptops for 100 TVs. With this information complete the tables below: Gains from trade for China China Produce Consume Gains from Trade TVs Laptops Gains from trade for Mexico Mexico Produce Consume Gains from Trade TVs Laptops