Q's Trade Region    14. The area we refer to as the trade region for Q lies between the worst trades Q would ever accept, its own PPF, and the best trades it could ever hope to negotiate with Z. Since Q's comparative advantage is in MP3 Player production, those best trades would be along a line from the point where Q produces only MP3 Players and at the same opportunity cost (the same slope as Z's PPF).

   Areas 2 and 3 lie below Q's no-trade PPF so these represent trades Q would never accept, since they are not in its trade region.

   Area 6 represents points that could only be attained if Z were willing to accept trades that put it below its own no-trade PPF, so those could never be reached, and hence do not belong in Q's trade region.

Copyright © 1995-2004 OnLineTexts.com, Inc. - All Rights Reserved