Answered: Draw the production possibility curve…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Draw the production possibility curve for each country using the data provided in the table.

b. Which country has an absolute advantage in what product? Which country has a comparative advantage in what product? Show your work!

c. Without trade, what is the price of food in terms of computers for both countries? Show
your work!

d. What is the range of prices (i.e., the CPC) at which trade can occur? Also, show (a) the possible CPC for each country and (b) the possible production and consumption possibility lines for both countries after trade. Show your work!

Computerland Production Possibilities
at Full Employment
Foodland Production Possibilities
at Full Employment
Food
(Billions of
Bushels)
Computers
(Millions)
Food
(Billions of
Bushels)
Computers
(Millions)
Point
Point
A
3
E
4.5
2
В
2
F
1
3
4
C
1
G
2
1.5
6
D
H
3

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