QUESTION 18Consider the following production possibilities frontier for Debbie and MelissaDebbleDonutsDonutsMelissaCoffeeCoffeeMoreover assume thatT-266 and W-99H-297 and Z-39Assume there is no trade between Debbie and Melissa.Melissa spends 65% of her time producing donuts and Debbie spends the W64 of her time producing donutsWhat would be the world's production of donuts?

In an economy, when two people are not trading with each other, their output production depends upon…

Answered: Consider the following production…

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter7: Economic Growth: Theory And Policy

Section: Chapter Questions

Problem 4TY

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Does intra-industry trade contradict the theory of comparative advantage?
France and Tunisia both have Mediterranean climates that are excellent for producing/harvesting green beans and tomatoes. In France it takes two hours for each worker to harvest green beans and two hours to harvest a tomato. Tunisian workers need only one hour to harvest the tomatoes but four hours to harvest green beans. Assume there are only two workers, one in each country, and each works 40 hours a week. Draw a production possibilities frontier for each country. Hint: Remember the production possibility frontier is the maximum that all workers can produce at a unit of time which, in this problem, is a week. Identify which country has the absolute advantage in green beans and which country has the absolute advantage in tomatoes. Identity which country has the comparative advantage. How much would France have to give up In terms of tomatoes to gain from trade? How much would it have to give up in terms of green beans?
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.
scenario Production Advantage and Opportunity CostsAssume there are two countries, the United States and France, and two goods, automobiles andcomputers.The table presented below shows the number of automobiles and computers that the United States andFrance can produce with the same amount of resources.United States FranceAutomobiles 120 100Computers 60 55Source: Pearson Education Inc. 1.1 Which country has an absolute advantage in computer production? Motivate your answer.1.2 Which country has a comparative advantage in the production of automobiles? Motivateyour answer. 1.3 Assume these countries trade with one another under the conditions of free trade. Whichcountry will specialise in the production of automobiles? Motivate your answer. 1.4 If free trade exists between the United States and France, what are the highest and lowestlevels for the price of an automobile (expressed in terms of computers)? Motivate youranswer by stating which level favours the United States and France.
Production Advantage and Opportunity CostsAssume there are two countries, the United States and France, and two goods, automobiles andcomputers.The table presented below shows the number of automobiles and computers that the United States andFrance can produce with the same amount of resources.United States FranceAutomobiles 120 100Computers 60 55Source: Pearson Education Inc. 1.1 Which country has an absolute advantage in computer production? Motivate your answer.1.2 Which country has a comparative advantage in the production of automobiles? Motivateyour answer. 1.3 Assume these countries trade with one another under the conditions of free trade. Whichcountry will specialise in the production of automobiles? Motivate your answer. 1.4 If free trade exists between the United States and France, what are the highest and lowestlevels for the price of an automobile (expressed in terms of computers)? Motivate youranswer by stating which level favours the United States and France.
American and Japanese workers can each produce 4 cars a year. An American worker canproduce 10 tons of grain a year, whereas aJapanese workers can produce 5 tons of grain ayear. To keep things simple, assume that eachcountry has 100 million workers.a. For this situation, construct a table analogousto the table in Figure 1.b. Graph the production possibilities frontier ofthe American and Japanese economies.c. For the United States, what is the opportunitycost of a car? Of grain? For Japan, what is theopportunity cost of a car? Of grain? Put thisinformation in a table analogous to Table 1.d. Which country has an absolute advantage inproducing cars? In producing grain?e. Which country has a comparative advantagein producing cars? In producing grain?f. Without trade, half of each country’s workersproduce cars and half produce grain. Whatquantities of cars and grain does each country produce?g. Starting from a position without trade, givean example in which trade makes each country better…
1. Home has 1,200 units of labour available. It can produce two goods, cars and televisions. The unitlabour requirementin car production is 3, while in television production it is 2.(a) Graph Home’s production possibility frontier.(b) What is the opportunity cost of cars in terms of televisions?(c) In the absence of trade, what would be the price of cars in terms of televisions? Why?
Suppose the land of Hardheart can make 2 goods, hamburgers & hot dogs, as listed below. Define Production Possibility Frontier. Graph the PPF for Hardheart. Be sure to label the points and the axes. A B C D E Hamburgers 0 50 120 180 250 Hot dogs 210 135 85 40 0 What is opportunity cost? Then, give the opportunity cost for moving from: 0 to 50 hamburgers 50 to 250 hamburgers 0 to 135 hot dogs

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