2. Suppose that Happy Land produces only two goods-food and suntan oil. Its production possibilities are: Food (pounds per month) 300 200 100 0 Active Land also produces only food and suntan oil, and its production possibilities are: Food (pounds per month) 150 100 Draw the two PPFs Suntan oil (gallons per month) 0 50 100 150 50 0 Suntan oil (gallons per month) 0 100 2000 300 a. What are the opportunity costs of food and suntan oil in Happy Land? b. Why are the opportunity costs the same at each output level? c. What are the opportunity costs of food and suntan oil in Active Land?

2. Suppose that Happy Land produces only two goods-food and suntan oil. Its production possibilities are: Food (pounds per month) 300 200 100 0 Active Land also produces only food and suntan oil, and its production possibilities are: Food (pounds per month) 150 100 Draw the two PPFs Suntan oil (gallons per month) 0 50 100 150 50 0 Suntan oil (gallons per month) 0 100 2000 300 a. What are the opportunity costs of food and suntan oil in Happy Land? b. Why are the opportunity costs the same at each output level? c. What are the opportunity costs of food and suntan oil in Active Land?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter1: Welcome To Economics!

Section: Chapter Questions

Problem 7SCQ: What is an example of a problem in the world today, not mentioned in the chapter, that has an...

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Question

2. Suppose that Happy Land produces only two goods-food and suntan oil. Its production
possibilities are:
Food (pounds per month)
300
200
100
0
Active Land also produces only food and suntan oil, and its production possibilities are:
Food (pounds per month)
150
100
50
0
Draw the two PPFs
Suntan oil (gallons per month)
0
50
100
150
Suntan oil (gallons per month)
0
100
2000
300
a. What are the opportunity costs of food and suntan oil in Happy Land?
b. Why are the opportunity costs the same at each output level?
c. What are the opportunity costs of food and suntan oil in Active Land?
d. If each nation specialized where they have a comparative advantage; and then traded, find the
acceptable ranges for trade.
1 pound of food would have to trade between which values of suntan oil?
1 pound of suntan oil would have to trade between which values of food?
e. If each nation produces where they have a comparative advantage, and the terms of trade are 50
pounds of food for 75 gallons of suntan oil, how much will each nation profit by, compared to
producing both good themselves? Happy Land
Active Land

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