Lesotho and Botswana are to engage in the trade of maize and bananas.
Each country has an equal amount of resources required to produce both maize and bananas. 500 units of resources are available in each country.
In Botswana it takes 5 resources to produce one ton of bananas and 20 resources to produce one ton of maize.
In Lesotho it takes 25 resources to produce one ton of bananas and 5 resources to produce on ton of maize.
3.7 Suppose each country decides to dedicate half of their total resources towards the production of both bananas and maize, how many tons of both bananas and maize would each country consume, also show the “total world” output, record these values under the heading: Consumption before trade (5)
3.8 Suppose these countries enter into a trade agreement that would see each specializing only in a product which they have absolute advantage in, has total world output improved? By how much? (for each product). (4)
3.9 If they decide to exchange (on one-to-one price base) half of their specialised products, compared to consumption before trade, how has specialisation impacted on individual consumption? What about the world output? (2)
3.10 Are countries better off trading against each other or not? Substantiate your answer with your previous answers. (2)
Lesotho and Botswana are to engage in the trade of maize and bananas. Each country has an equal amount of resources requ
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