Assume that two countries, A and B, can produce Beef and Barbecues and the production possibilities frontiers of two countries are represented by: Country A: Beef = 30 - 1.25 BBQ and Country B: BBQ = 15 - 0.5 Beef Barbecues are measured in units, beef in kilograms. a) On a single chart, graph the production possibility frontiers for Country A and for Country B. Make sure you use a good scale and mark all your axes and important curves or points. b) Interpret the slope and the shape of the PPF for each country and make the relevant comparisons. c) Assume that each country allocates half of its resources to the production of beef and half of its resources to the production of barbecues. Under autarky (No trade), how much would each country consume of the two products? Plot these points on the graph as Ca and Cb respectively d) Should either of these countries specialize in the production of beef and/or barbecues? If yes, explain which country and which products and why. If they should not try, explain why not.
Assume that two countries, A and B, can produce Beef and Barbecues and the production possibilities frontiers of two countries are represented by: Country A: Beef = 30 - 1.25 BBQ and Country B: BBQ = 15 - 0.5 Beef Barbecues are measured in units, beef in kilograms. a) On a single chart, graph the production possibility frontiers for Country A and for Country B. Make sure you use a good scale and mark all your axes and important curves or points. b) Interpret the slope and the shape of the PPF for each country and make the relevant comparisons. c) Assume that each country allocates half of its resources to the production of beef and half of its resources to the production of barbecues. Under autarky (No trade), how much would each country consume of the two products? Plot these points on the graph as Ca and Cb respectively d) Should either of these countries specialize in the production of beef and/or barbecues? If yes, explain which country and which products and why. If they should not try, explain why not.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Assume that two countries, A and B, can produce Beef and Barbecues and the production possibilities frontiers of two countries are represented by:
Country A: Beef = 30 - 1.25 BBQ and
Country B: BBQ = 15 - 0.5 Beef
Barbecues are measured in units, beef in kilograms.
a) On a single chart, graph the production possibility frontiers for Country A and for Country B. Make sure you use a good scale and mark all your axes and important curves or points.
b) Interpret the slope and the shape of the PPF for each country and make the relevant
comparisons.
c) Assume that each country allocates half of its resources to the production of beef and half of its resources to the production of barbecues. Under autarky (No trade), how much would each country consume of the two products? Plot these points on the graph as Ca and Cb respectively
d) Should either of these countries specialize in the production of beef and/or barbecues? If yes, explain which country and which products and why. If they should not try, explain why not. d) Should either of these countries specialize in the production of beef and/or barbecues? If yes, explain which country and which products and why. If they should not try, explain why not. d) Should either of these countries specialize in the production of beef and/or barbecues? If yes, explain which country and which products and why. If they should not try, explain why not.
e) If trade were to occur between Country A and Country B, what would be a reasonable exchange rate? Support your answer.
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