This is a file upload question. Write down your solution in…
This is a file upload question. Write down your solution in a piece of paper, take a picture and upload your file. Don’t forget to show your work! Do not write only the final answer (number), show how you got that number. IMPORTANT: typed solutions will not be accepted! The production of shoes and shirts of one worker in country A and in country B is shown below: Suppose that before trade (or without trade) each country has 10 workers and they each allocate 5 workers for the production of shoes and 5 workers for the production of shirts. Complete the table below finding the maximum production and consumption of both goods for each country (show your work!): Maximum consumption and production before trade Country Shoes Shirts A B 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 A specialize? How about B? 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). Complete the table below finding the with trade production of the countries: Maximum production with trade Country Shoes Shirts A B If the countries decide to engage in trade the TERMS-OF-TRADE will be set at 17 shoes for 20 shirts. With this information complete the tables below: Gains from trade for country A Country A Produce Consume Gains from Trade Shoes Shirts Gains from Trade for Country B Country B Produce Consume Gains from Trade Shoes Shirts