How can specialization and exchange improve the economic welfare of a country?
Click here to view an interactive exercise. This will open a new browser window. Then answer the questions below. This exercise is from the website for Begg and Ward Economics for Business. If you have clicked on the link above and cannot see the interactive exercise, you may need to install a free Java plugin for you internet browser. Click here for the plugin. The graph shows the production possibilities for the United States and Brazil for two goods, coffee and wheat. The straight-line production possibilities curves (red for the U.S., blue for Brazil) assume that there are constant opportunity costs of production for the two goods, although these costs differ in the two countries. The different endowments of the two countries are also reflected in the graph: The U.S. can produce more total wheat than can Brazil while Brazil can produce more coffee. Prior to any trade, each country has opted to use half of their resources to produce each of the goods. Any gains from trade reported i
