a)
The question requires us to draw a graph showing hypothetical production possibilities curve for the McCoy family.
a)
Explanation of Solution
The following graph represents the
In the above graph, the x-axis represents the quantity of corn while the y-axis represents the quantity of fried chicken.
The line AB shows the production possibility curve for the McCoy family.
The production possibility curve shows the trade-offs between the two products an economy is producing by using the given resources.
b)
The question requires us to determine the family which has the
b)
Explanation of Solution
Given that the Hatfield family has a comparative advantage in producing corn. So, two families will be better off when McCoy will have a comparative advantage in producing chicken.
After having a comparative advantage, these two families can trade with each other and can
So, the McCoy family has a comparative advantage in producing chickens.
c)
The question requires us to find out the way that helps the two families to increase their consumption of both chicken and corn.
c)
Explanation of Solution
Given that the two families are efficient in the production of corn and chicken. To increase their consumption of both chicken and corn, each should achieve specialization in one product, and they should trade.
With the help of specialization and trade, they can increase their consumption of both chicken and corn.
Chapter 1R Solutions
Krugman's Economics For The Ap® Course
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