1. Consider the countries of Canada and Mexico. In one month, Canada can produce a maximum of 150 wheat or 200 barley. Mexico can also maximize production of 150 wheat, but their maximum barley output is 150. a. Assuming each country devotes half of its resources to growing each crop, calculate the production level of each crop in each country and overall production. b. Determine comparative advantage in each and show how you found this. c. Calculate production levels in each country of each crop under specialization and also
1. Consider the countries of Canada and Mexico. In one month, Canada can produce a maximum
of 150 wheat or 200 barley. Mexico can also maximize production of 150 wheat, but their
maximum barley output is 150.
a. Assuming each country devotes half of its resources to growing each crop, calculate the
production level of each crop in each country and overall production.
b. Determine
c. Calculate production levels in each country of each crop under specialization and also
overall production.
d. How much of each crop was gained by specialization?
2. Using cheddar cheese, explain in two sentences or fewer the following:
a. Income Effect
b. Substitution Effect
c. Law of Diminishing Marginal Returns
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