Salads (per hour) 30 Salads (per hour) 30+ 25+ 20 25 20 15 "으 15 10+ 10- 5+ 5 Lis PPF Joe's PPF 0 5 10 15 20 25 30 Smoothies (per hour) 0 5 10 15 20 25 30 Smoothies (per hour) (b) Joe's gains from trade (a) Liz's gains from trade The figure above shows the production possibilities frontiers (PPFs) for Liz and Joe. If they decide to trade salads for smoothies: O Liz should specialize in salads and Joe should specialize in smoothies. O Liz should specialize in smoothies and Joe should specialize in salads. O Liz should specialize in producing both since she has the same opportunity cost for each. O Joe should find another trading partner because he would have to sell fewer smoothies.

What does a production possibilities frontier illustrate?

Residents of the town of Smithfield like to consume hams, but each ham requires 10 people to produce it and takes a month. If the town has a total of 100 people, what is the maximum amount ham the residents can consume in a month?

Could a nation be producing in a way that is allocatively efficient, but productively inefficient?

Would an op-ed piece in a newspaper urging the adoption of a particular economic policy be a positive or normative statement?

What are the similarities between a consumers budget constraint and societys production possibilities frontier, not just graphically but analytically?

Review the numbers for Canada and Venezuela from Table 33.12 which describes how many barrels of oil and tons of lumber the workers can produce. Use these numbers to answer the rest of this question. Draw a production possibilities frontier for each country. Assume there are 100 workers in each country. Canadians and Venezuelans desire both oil and lumber. Canadians want at least 2,000 tons of lumber. Mark a point on their production possibilities where they can get at least 3,000 tons. Assume that the Canadians specialize completely because they figured out they have a comparative advantage in lumber. They are willing to give up 1,000 tons of lumber. How much oil should they ask for in return for this lumber to be as well off as they were with no trade? How much should they ask for if they want to gain from trading with Venezuela? Note: We can think of this ask as the relative price or trade price of lumber. Is the Canadian ask you identified in (b) also beneficial for Venezuelans? Use the production possibilities frontier graph for Venezuela to show that Venezuelans can gain from trade.

What is an example of a problem in the world today, not mentioned in the chapter, that has an economic dimension?

True or False: The source of comparative advantage must be natural elements like climate and mineral deposits. Explain.

What is Maries opportunity cost of purchasing a pie?