1. One German worker can produce either cars or 10 tons of grain a year. One Japanese worker can produce either 4 cars or 5 tons of grain a year. To keep things simple, assume that each country has 100 million workers. a) Complete the following table with the number of workers needed to make one car or one ton of grain in Germany and Japan Workers Needed to make 1 Car Germany Japan 1 Ton of Grain b) Graph the production possibilities frontier (PPF) for German economy as well as the PPF for Japanese economy in the same graph. Carefully label and identify the endpoint in your graphs.

1. One German worker can produce either cars or 10 tons of grain a year. One Japanese worker can produce either 4 cars or 5 tons of grain a year. To keep things simple, assume that each country has 100 million workers. a) Complete the following table with the number of workers needed to make one car or one ton of grain in Germany and Japan Workers Needed to make 1 Car Germany Japan 1 Ton of Grain b) Graph the production possibilities frontier (PPF) for German economy as well as the PPF for Japanese economy in the same graph. Carefully label and identify the endpoint in your graphs.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter3: Interdependence And The Gains Rrom Trade

Section: Chapter Questions

Problem 2PA

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In Germany it takes three workers to make one television and four workers to make one video camera. In Poland It takes six workers to make one television and 12 workers to make one video camera. Who has the absolute advantage in the production of televisions? Who has the absolute advantage in the production of video cameras? How can you tell? Calculate the opportunity cost of producing one additional television set in Germany and In Poland. (Your calculation may involve fractions, which Is tine.) Which country has a comparative advantage in the production of televisions? Calculate the opportunity cost of producing one video camera in Germany and in Poland. Which country has a comparative advantage in the production of video cameras? In this example, is absolute advantage the same as comparative advantage, or not? In what product should Germany specialize? In what product should Poland specialize?
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.
Explain why converging economies may present a strong argument for limiting flows of capital but not for limiting trade.
Brazil can produce 100 pounds of beef or 10 autos. In contrast the United States can produce 40 pounds of beef or 30 autos. Which country has the absolute advantage in beef? Which country has the absolute advantage in producing autos? What is the opportunity cost of producing one pound of beef In Brazil? What is the opportunity cost of producing one pound of beef in the United States?
Occasionally, a government official will argue that a country should strive for both a trade surplus and a healthy inflow of capital from abroad. Explain why such a statement is economically impossible.