广东外语外贸大学《新编国际贸易》05 Answers to Textbook Problems.docVIP

Answers to Textbook Problems 1. Note how welfare in both countries increases as the two countries move from production patterns governed by domestic prices (dashed line) to production patterns governed by world prices (straight line). 2. 3. An increase in the terms of trade increases welfare when the PPF is right-angled. The production point is the corner of the PPF. The consumption point is the tangency of the relative price line and the highest indifference curve. An improvement in the terms of trade rotates the relative price line about its intercept with the PPF rectangle (since th