Assume that the people of Phobos and Deimos (the moons of Mars) use equal resources to produce consumer and capital goods, as illustrated in the table below showing maximum possible production figures. Country Capital Goods Consumer Goods Phobos 20 units 120 units Deimos 60 units 120 units a. Draw a fully labeled production possibility curve for Phobos. Place capital goods on the vertical axis and consumer goods on the horizontal axis. Assume constant opportunity cost. b. On your graph from part (a), label an inefficient point of production I, an efficient point of production E, and an unattainable point of production U. c. Which country has the comparative advantage in the production of capital goods? Explain. d. If Deimos shifted from producing 50 units of capital goods and 20 units of consumer goods to producing 35 units of capital goods and 50 units of consumer goods, what would be the impact on its economic growth in the long run? e. Based on the data table, what range of consumer goods could be traded for 10 units of capital goods that would be mutually beneficial?

Assume that the people of Phobos and Deimos (the moons of Mars) use equal resources to produce consumer and capital goods, as illustrated in the table below showing maximum possible production figures. Country Capital Goods Consumer Goods Phobos 20 units 120 units Deimos 60 units 120 units a. Draw a fully labeled production possibility curve for Phobos. Place capital goods on the vertical axis and consumer goods on the horizontal axis. Assume constant opportunity cost. b. On your graph from part (a), label an inefficient point of production I, an efficient point of production E, and an unattainable point of production U. c. Which country has the comparative advantage in the production of capital goods? Explain. d. If Deimos shifted from producing 50 units of capital goods and 20 units of consumer goods to producing 35 units of capital goods and 50 units of consumer goods, what would be the impact on its economic growth in the long run? e. Based on the data table, what range of consumer goods could be traded for 10 units of capital goods that would be mutually beneficial?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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