(a) On two separate graphs sketch the initial PPF for the two countries with Food on the x-axis. (b) If Japan and Peru employ half its workers to produce Food and half to produce Fuel how much of each good can they consume? Label this point A and A* respectively. (c) Which country has the absolute advantage in food? In fuel? Explain.
(a) On two separate graphs sketch the initial PPF for the two countries with Food on the x-axis. (b) If Japan and Peru employ half its workers to produce Food and half to produce Fuel how much of each good can they consume? Label this point A and A* respectively. (c) Which country has the absolute advantage in food? In fuel? Explain.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Transcribed Image Text:Suppose there are two countries Peru and Japan that
produce Food and Fuel. Peru can produce 7,523 units of
Food or 17,853 units of Fuel using a labour force of 8000.
Japan can produce 5,733 units of Food or 24,156 units of
Fuel using a labour force of 5000.
(a) On two separate graphs sketch the initial PPF for the
two countries with Food on the x-axis.
(b) If Japan and Peru employ half its workers to produce
Food and half to produce Fuel how much of each good can
they consume? Label this point A and A* respectively.
(c) Which country has the absolute advantage in food? In
fuel? Explain.
Expert Solution
Step 1
Given information:
Peru can produce either 7,523 units of food or 17,853 units of fuel using 8000 labour force.
Japan can produce either 5,733 units of food or 24,156 units of fuel using 5000 labour force.
Explanation:
(a)
Production possibility frontier (PPF): it refers to the graphical representation of two goods that can be produced using given resources.
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