6. Working with Numbers and Graphs Q9
The following table summarizes the combinations of goods X and Y that two individuals, Nicki and Kamal, can each produce individually. If each person specializes in the production of the good for which they have the comparative advantage, then would specialize in the production of good \( Y \), and would specialize in the production of good \( X \). (Hint: Calculate the opportunity cost of producing \( X \) and \( Y \) for each individual.) Suppose that Kamal and Nicki each specializes in the production of the good in which each has a comparative advantage. Fill in the top row of the following table to indicate Kamal’s and Nicki’s output of each good. After specialization, suppose the two agree on a price of 9 units of good X for each unit of good Y . When the two individuals make the trade, they exchange 90 units of good \( X \) for 10 units of good \( Y \). Recall that the individual who has specialized in the production of \( X \) would trade 90 units of good \( X \) and receive 10 units of good \( Y \), while the individual who specialized in the production of good \( Y \) would trade 10 units of good \( Y \) and receive 90 units of good \( X \). In the previous table, fill in the second row to indicate the amounts of good \( X \) and good \( Y \) each individual has after the trade.
The following graphs plot Nicki’s production possibilities frontier (PPF) in purple and Kamal’s PPF in blue, respectively. Using the second row of the previous table, plot Nicki’s new combination of \( X \) and \( Y \) with the grey point (star symbol). Using the second row of the previous table, plot Kamal’s new combination of \( X \) and \( Y \) with the tan point (dash symbol).
True or False: This combination of \( X \) and \( Y \) was already attainable to these individuals before the trade. True False
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