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Principles of Macroeconomics Assignment #8: International Trade Model Answer the questions based on the following production possibilities data for Narnia and Somosa

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Principles of Macroeconomics Assignment #8: International Trade Model Answer the questions based on the following production possibilities data for Narnia and Somosa. All numbers are in 1,000's. Narnia Production Possibilities: Computer Chips Fuel Injectors A 80 0 B 60 20 ? 40 40 D 20 60 E 0 80 Somosa Production Possibilities: D Computer Chips Fuel Injectors ? 40 0 B 30 20 ? 20 40 10 60 E 0 80 Questions: I 1. If trade occurs between Narnia and Somosa, which nation should export which product? Why? 2. Assume the countries engage in trade and Narnia exports computer chips to Somosa in exchange for fuel injectors. What is the least amount of fuel injectors Narnia will accept for one computer chip? What is the most amount of fuel injectors Somosa will be willing to trade for one computer chip? 3. Assume that prior to specialization and trade, Narnia and Somosa chose production possibility "C." Now each specialized according to comparative advantage. What will be the resulting gains from trade? Explain.