Suppose there are two countries Peru and Japan that produce Food and Fuel. Peru can produce 7,523 units of Food or 17,853 units of Fuel using a labour force of 8000. Japan can produce 5,733 units of Food or 24,156 units of Fuel using a labour force of 5000. (a) On two separate graphs sketch the initial PPF for the two countries with Food on the x-axis. (b) If Japan and Peru employ half its workers to produce Food and half to produce Fuel how much of each good can they consume? Label this point A and A* respectively. (c) Which country has the absolute advantage in food? In fuel? Explain.
Suppose there are two countries Peru and Japan that produce Food and Fuel. Peru can produce 7,523 units of Food or 17,853 units of Fuel using a labour force of 8000. Japan can produce 5,733 units of Food or 24,156 units of Fuel using a labour force of 5000.
(a) On two separate graphs sketch the initial
(b) If Japan and Peru employ half its workers to produce Food and half to produce Fuel how much of each good can they consume? Label this point A and A* respectively.
(c) Which country has the absolute advantage in food? In fuel? Explain.
(d) Which country has the
(e) Which good(s) should each country specialize in?
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