The countries of East Wakovia and West Wakovia have the production possibilities tables for tobacco and corn shown below. Note that the costs of producing tobacco and corn are constant in both countries
(a) If East Wakovia is currently producing at combination D on its own PPC, and West Wakovia is at combination C on its own PPC, what would be gains from specialization and trade?
(b) Assume the terms of trade is 1tobacco=1.5 corn. Draw the production possibility curves (PPC) for East Wakovia and West Wakovia with and without an international trade.
East Wakaria’s Production Possibilities Table*ProductAlternative( tons !AETobacco201012Corn41210West Takoria’s Production Possibilities Table*ProductAlternative( tons"[IFTobacco151257Comm10152025
