(Figure: The Production Possibility Frontiers for Kansas and Wisconsin) Use Figure: The Production PossibilityFrontiers for Kansas and Wisconsin. In autarky, Kansas produces and consumes 30 gallons of milk and 80bushels of corn, while Wisconsin produces and consumes 80 gallons of milk and 60 bushels of con. If the twostates engage in trade, with cach state specializing in the good in which it has a comparative advantage, worldproduction of milk will:KansasWisconsinCormCorn(bushels)(bushels)2252252002001751751501501251251001007575505025-25-25 5075 100 125 150 175 20025 s075 100 125 150 175 200Milk (gallons)MIlk (gallons)decrease by 30 gallons.increase by 90 gallons.increase by 120 gallons.remain constant.

The production possibility frontier (PPF) is a curve this is used to find out the combinationture of…

Answered: 100 100 75 75 50 50 25 25- 25 50 75 100…

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter3: Interdependence And The Gains From Trade

Section: Chapter Questions

Problem 6QCMC

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Look at Exercise 33.2. Compute the opportunity costs of producing sweaters and wine in both France and Tunisia. Who has the lowest opportunity cost of producing sweaters and who has the lowest opportunity cost of producing wine? Explain what it means to have a lower opportunity cost.
In France it takes one worker to produce one sweater, and one worker to produce one bottle of wine. In Tunisia it takes two workers to produce one sweater, and three workers to produce one bottle of wine. Who has the absolute advantage in production of sweaters? Who has the absolute advantage in the production of wine? How can you tell?
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.

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100 100 75 75 50 50 25 25- 25 50 75 100 125 150 175 200 25 s0 75 100 125 150 175 200 Milk (gallons) MIlk (gallons) decrease by 30 gallons. increase by 90 gallons, increase by 120 gallons. remain constant.