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Question: 7 transportation costs and comparative advantage the following graph shows...

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7. Transportation costs and comparative advantage The following graph shows a fictional world economy that consists of only two countries, Golikia and Baxton. Both countries produce boats under increasing-cost conditions. Note that the left-hand part of the diagram is a mirror image of a standard supply-demand diagram, and therefore the supply and demand curves slope in directions opposite their usual directions 2 2 Golikia Baxton 20 16 12 + 10 4 10 9 8 7 6 5 4 3 211 2 3 4 5 6 7 8 9 10 BOATS 2 9In the absence of trade (that is, autarky), the equilibrium price in Golikia is (Hint: Enter all monetary values in full. For example, $7,000 rather than $7.) , and the equilibrium price in Baxton is S In the absence of trade, which of the following statements is correct? Golikia has the comparative advantage in production of boats. Baxton has the comparative advantage in production of boats. Golikia and Baxton are equally good at producing boats. Now suppose both countries open up to international trade with each other.Equalizing Price (Dollars) Consumption at Equalizing Price (Boats) Production at Equalizing Price (Boats) Exports (Boats) Imports (Boats) Without Transportation Costs Golikia Baxton With Transportation Costs Golikia Baxton Now suppose that the per-unit cost of transporting a boat between Golikia and Baxton is $4,000 For each country, use the previous graph to compute the equalizing price, consumption and production at that price, and the quantity of exports and imports when transportation costs equal $4,000. Enter these amounts into the last two rows of the previous table. Compare free trade in the absence of transportation costs with the case when transportation costs are included. Which of the following statements about how the trade between Golikia and Baxton differs in the presence of transportation costs relative to trade when then are no transportation costs are correct? Check all that apply. Baxton will produce less, consume more, and export less. Golikia will produce more, consume less, and import less. Baxton will produce more, consume less, and import less. Golikia will produce less, consume more, and export less.

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