GAINS FROM TRADE—These questions require you to apply the so-called “gains from trade” model to corn and fish. So, the table below shows hypothetical endpoints on production possibilities frontiers (“PPFs”) for two federally recognized American Indian tribes—the Hopi Tribe in Arizona and the Yakama Nation in Washington. Both tribes can produce corn and fish on their reservations. ???
TRIBE CORN FISH
Hopi 200 10
Yakama 40 160
If the two tribal PPFs have a constant slope so that neither tribes’ opportunity costs (fish for corn or vice versa) vary depending upon how much fish and or corn is produced, which of the following statements is true?
A. Because they have the same marginal rate of transformation of fish for corn and corn for fish, there are no gains to be realized from trade between these two tribes.
B. The Yakama Nation has both a comparative and an absolute advantage in production of fish but the Hopi Tribe has a comparative advantage and an absolute advantage in production of corn.
C. For the Yakama Nation, the opportunity cost of producing one ton of fish is 200 tons of corn while, for the Hopi Tribe, the opportunity cost of producing one ton of corn is 400 tons of fish.
D. The Yakama Nation has a comparative advantage in production of fish and the Hopi Tribe has a comparative advantage in production of corn.
E. None of the statements in A—D are true.