Pre Mid Test 2, International coon E | Name: Roshaane Gub- ee Semestov: 5 Bode: ant Oclobor 034. Now = Answer the thadw between two nations with the identical prodluctio aonticn 16 possible- Because there is diffelence in the fost and demand prefosonur 0 each Coumt ny 0 trode botweew two countries cam be possibleIn the above Figure, Pts the | identical productisy frontier of Bethy mabiens. Notiely 4 is ok _ apn i advantage im Ky. so ‘it wil) specialine tn X amd roach point | Boamd Nation 2 har companotive advamla ge in Y, thu» apecialine Y amd neach ot pont __ Bl Ate. trading, Nation 4. _jexchamge some X for Yomd Came to point E amd Natim a xchamge some \ fos X amd carw to point E’- Now Both nations |. ane on their highest mndtffoenve Curve ama beth mation cam gain in “loms ef X ond J. ~ Thus _,mutu bemefie! af trade cam_be take plac. on the bosis of diffeenuw in laste between | two nations. ‘Seannad ith CamScanerHL Discuss hically “he basis mdb ae bode umden incteasing opportunity cost? 1S The. diffrence in nolative commodily prices Alvows thy compan at ive advantage amd form thw boris for mutually beneficial trode ‘between tule vations Lowen relative price for a commodi means the comparotive adevaento ge of commodt ly and: a cwnmporative disadvanitage. iv_other commodity » Cache nation spoctabine im the — cornmodily of ‘ils comparative advamta , aa exchange parts ifs _oue wh fae tho connmnedity & ik comparrtive disadwomta ge: As, eachv nottovy specialine thw product_of_ifs voor onortve, ndhantoge t 0 load. to innvease tw ‘oppoatusai ty. cost: A_ nation cam _continuy {a4 echabinotion, until relalive comanrodl tly prices in, lwo nations. = become equal ab» which: tuade i | tn equilibrium.» Due to _trovdle., both natiorvs cam consume monk « nnphical iastrations -- Following are tivo hypothe bioot : graphs. of Nation 1 anc Nother {a let!’ Matton 4 how comporotiver advantage tn commedily X amo’ Nation din commodity Y. Ne Past +——+ lo 30 Go te % Ie to WseX Mary names : When beth Nation 4 and A com do thade the Nadion 4 Specialine in_ihe Production amok __exkpont of Conmne obi by X amd similenl} ‘Seannad ith CamscannerNation 2 eet “speciale @ in _cornnnedity Initio-tin rom point A, ho (Nolen 1 ie ast don lea it mover down ib Pater foontien 5 Ub _incurs | imiworing_ ust in_tho production of X and” tk is shown bl, its increasing slope of productidy frontier. Nation 2 a starting A point ACOs ie spociallne | im the. pAodluct ion a commoatty and Moves upubandl along iB paoducdion foantion. a it AS incacasing oppontum't} ost Ne iva) iets viel (el haga by tho decline lm thy slope of producti fron tied: i Both nations can specialine im omducttory wnti£ the that reaches at which the relative | mmodi mice of both nations become equod: This point _is Pp ae Natfon 4 ond fo! of Nation a. [By doing trade, Nation 1 moves dours foe potat A_to point) Bee iy fading. Agoches | at point E. on “the andi ference auve_Ill 1 ‘Seannad vith CamscannerSimul ,_ Nation 2 mover {roy _ int A’ te Bin productlen amd ok ‘then by “trading . ending Up 2 point 6’ ow tho mdi ffersm& curve Ill’. And aAhf is the highest spate of Nation 2. ‘Seannad vith Camscanner