Economics *Micro

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Goods

Computer Wine
x Y
Qc Qw
Country mil mil gal
US 60 240
France 33 1/3 200

Assuming that without trade,
-the US Produces 30 million computers, and
- France produces 80 million gallons of wine.

Also assuming that
-both countries will completely specialize in the good in which they have a comparative advantage,
-they will trade with one another using the following terms of trade:
1 computer = 5 gallons of wine,
-the US has 120 million gallons of wine to consume after trade.
Which of the following statements is true?
a. Without trade, France will produce 30 million computers.
b. The US will specialize in wine and produce 120 million gallons of wine.
c. After specialization and trade, France will have 100 million gallons of wine and 20 million computers to consume.
d. After specialization and trade, the US will have 120 million gallons of wine and 36 million computers to consume.

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