Suppose that country A and country B start trading; 1 unit of cotton is exchanged with 1 unit of wheat. Draw the trade line into their PPF. The image presents two Production Possibility Curves (PPC) for Country A and Country B, illustrating their respective capacities to produce wheat and cotton.**Country A's PPC**- **Axes**: The vertical axis represents wheat production in thousand bushels, and the horizontal axis represents cotton production in thousand bales.- **Curve**: The PPC is a straight line. The maximum production of wheat is 30 thousand bushels when no cotton is produced. Conversely, Country A can produce up to 40 thousand bales of cotton with no wheat output.- **Implication**: This curve demonstrates the trade-off between the two goods, indicating the country's resource allocation efficiency.**Country B's PPC**- **Axes**: Similar to Country A, the vertical axis shows wheat in thousand bushels, and the horizontal axis shows cotton in thousand bales.- **Curve**: The PPC is a straight line. Country B can produce a maximum of 90 thousand bushels of wheat with zero cotton production. Maximum cotton production is 80 thousand bales with no wheat.- **Implication**: It reflects Country B's different production capacity and trade-offs compared to Country A.These PPCs indicate the possible production levels of wheat and cotton for each country, assuming they utilize all resources efficiently. They also highlight comparative advantages and the potential for trade between the two countries based on their production capacities and needs.

We will use production possibility frontier to solve this question.

Answered: Country A Country B Wheat (thousand…

Country A Country B Wheat (thousand bushels) Wheat (thousand bushels) 90 30 PPC PPC 40 Cotton (thousand bales) 80 Cotton (thousand bales)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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