Suppose that there are two countries, the North and the South. Given the North's resources, it can produce 4 Cars in an hour or 1 unit of wheat in an hour. Given the South's resources, it can produce 1 car per hour or 4 units of wheat in an hour.
Both countries have forty hours in total to produce wheat and cars.
Finally, the goal of each country is to have the most possible cars and wheat, but also to always have an equal amount of each. In other words, 10 cars and 10 wheat is just as valuable as 11 cars and 10 units of wheat, or 10 cars and 11 units of wheat, but 11 cars and 11 wheat would make the country even better off.
The question below relates to the
Finally, the first set of questions refers to a world where the North and South cannot trade, while the second set of questions refers to a world where they can trade. In the latter set of questions, the optimal trade refers to a trade between the two countries that will give them the most cars and wheat, but still have an equal amount of each.
1 Consider the PPF of the North. Characterize each combination of cars and wheat in terms of whether they are inefficient, efficient or unattainable.
160 cars and 130 units of wheat
8 Cars and 8 units of wheat
160 cars and 0 units of wheat
2 Indicate whether the country has an
The North
The South
3 What is the
4 What is the opportunity cost of using one hour to produce cars for the North? [Put your answer in decimal form]
5
If the North and South cannot trade how many cars should the North produce?
6
If the North and South cannot trade, how many units of wheat should the South produce?
7 Which of the following is true if the North and South can trade.
a.North should export cars and export wheat
b.North should export cars and import wheat
c.North should import cars and export wheat
d.North should import cars and import wheat
8
How many cars should the North produce if they can trade with the South?
9
If the North can trade with the South how much wheat would it want to produce?
10
If the North can trade with the South how many cars should it export to the south? Please put zero if the North should not export cars to the South.
11
After the North and the South complete the optimal trade, they south will have how many cars?
12
After the North and the South complete the optimal trade, they south will have how many units of wheat?
After the North and South complete the optimal trade, which of the following are true, all other things equal.
13
a.Only the South is better off
b.The North and South are better off
c.North and the South are worse off
d.Only the North is better off
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