PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 16, Problem 3RQ
To determine
Describe the consumption possibilities of a country.
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Q32
Consider the Production Possibility Frontiers of two countries, Australia and Brazil. Assume both have linear PPFs and the two countries both produce the same two goods: fruits and grain.
Given its resources, Australia can produce either 2 units of grain per day or 1 unit of fruits; Brazil can produce either 5 units of grain or 4 units of fruits. (You may, for your own use, find it helpful to draw the Production Possibilities Frontiers for each country, though these won't be included in the answers you provide in you online responses.)
a. If there were no trade, what would be the local price of fruits in each country, measured in units of grain?
b. If trade is allowed, which country will export fruits and which country will export grain (if any)?
c. What are the gains from trading a unit of fruit if the international price of fruit is equal to the average of the local prices in the two countries?
d. How are the gains from trade distributed? Comment on why the benefits…
Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 16 units of food per year or 8 units of clothing. Which of the following is true?
Question 35 options:
Georgeland has a comparative advantage, but not an absolute advantage, in producing clothing.
Georgeland has both a comparative and absolute advantage in producing clothing.
Alland has a comparative advantage, but not an absolute advantage, in producing food.
Alland has an absolute advantage, but not comparative advantage, in producing food.
Chapter 16 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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- I need the answer for part C and the second part of D. Instructions: Manipulate numbers in the Settings window as needed to answer the following questions. You may find it helpful to click "combined" above the graph window to view each country's production on a single graph. Suppose Malaysia's production possibilities include a maximum of 80 units of rice or 120 units of lumber, and Canada's production possibilities include a maximum of 80 units of rice or 40 units of lumber. Then suppose each country initially allocates 50% of its labor to producing each product. a) Total production by the two countries equals 80 tons of rice and 80 ft3 of lumber. b) Now suppose that Malaysia increases the labor it allocates to lumber by 10%. Its lumber production rises by 12 and its rice production falls by 8 . c) If Canada reallocates its labor to increase its rice production by exactly the amount that Malaysia's rice production fell, by how much must its lumber production fall? ??? ft3 d)…arrow_forwardConnect Problem CP 20-05 (algo) If the fictitious country of Islandia puts all of its production resources into fish, it can produce 40 units of fish. If it puts all of its production resources into coconuts, it can produce 20 units of coconuts. If the fictitious country of Mountania puts all of its production resources into fish, it can produce 30 units of fish. If it puts all of its production resources into coconuts, it can produce 10 units of coconuts. Assume that both countries have constant cost functions for both products. Instructions: Round your answers to 2 decimal places. a. What is the opportunity cost of producing 1 unit of fish in Islandia? unit(s) of coconuts b. What is the opportunity cost of producing 1 unit of coconuts in Islandia? unit(s) of fish c. What is the opportunity cost of producing 1 unit of fish in Mountania? unit(s) of coconuts d. What is the opportunity cost of producing 1 unit of coconuts in Mountania? unit(s) of fish e. (Click to select) v has a…arrow_forwardAccumulation of capital and change in technology bring economic growth, which means that the PPF keeps shifting outward: Production that was unattainable yesterday becomes attainable today; production that is unattainable today will become attainable tomorrow. Why doesn’t this process of economic growth mean that scarcity is being defeated and will one day be gone? (Word count: 150 words max.)arrow_forward
- CAPITAL GOODS PPC₂ PPG CONSUMER GOODS Suppose that this year, the economy is operating at point A, but then an earthquake destroys more capital than is being produced during the year. On the following graph, the PPC that best describes the Wilshire economy next year is (Note: PPC and PPC, are the same as on the previous graph.)arrow_forwardIn Islandia, a small economy, Jack and Jill shall make their production and consumption decisions together. Jack can produce either 8 kg banana or 8.8 kg tea per day. Jill can produce either 8 kg banana or 19.2 kg tea per day. Suppose now they are open to trade with the rest of the world. The price of banana is $2/kg and the price of tea is $1/kg in the world market. Suppose Islandia is small enough that its behavior will not affect the world prices. If they are going to consume 7 kg banana, then, they will end up consuming a total of [Answer] kg tea. (In decimal numbers, with two decimal places, please.) Please answer with all the steps, to help me understand the solution. Will give a positive rating.arrow_forwardAssume Bolivia and Chile use the same amount of resources to produce tin and copper. The following graphs represent their production possibilities curves. Bolivia Chile 12 10 10 8. 8. 6. 4 2 4 6. 8. 10 12 14 2 4 6. 8. 10 12 14 16 Tons of copper Tons of copper Chile has a comparative advantage in the production of which metal? Chile has a comparative advantage in the production of (Click to select) v Tons of tin Tons of tinarrow_forward
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- Table 3-9 Summary of the Gains from Trade Without Trade Production and Consumption With Trade Production Trade Consumption Gains from Trade Pitchers of Lemonade 200 400 Alice Gives 191 a e Pizzas 100 0 Gets 112 b f Pitchers of Lemonades 180 0 Betty Gets 192 С g Pizzas 180 300 Gives 110 d h Refer to Table 3-9. The values in the table represent the amounts of lemonade and pizzas that Alice and Betty can produce in one week without and with specialization and trade. What are Alice and Betty's gains from specialization and trade?arrow_forwardThe following graph shows a PPC for the imaginary country of Caldonia producing flyboats and time-stopping watches. Suppose a technological change improves production of time-stopping watches. So Caldonia can make more time-stopping watches with the same amount of resources, whereas production of time-stopping watches does not change. Adjust the vertical and horizontal intercepts of the PPC to show the effect of the the technological change on Caldonia's economy. (Hint: Do not move the intercept if the production of a good is not affected.) Quantity of time-stopping watches PPC Quantity of flyboats Before the technological change, point X was first box unattainable inefficient efficient second box unattainable inefficient efficient PPC and after the event, it isarrow_forwardGermany is the European Union’s largest economy. Suppose that it produces two goods: electricity and food. Electricity (e) is produced with large capital investments (C), especially in green energy, while food (f) is labour intensive (L). This means ae > af. You are given the following graph (graph attached as image to question) determined from the final prices of food and electricity and the optimal capital-labour ratios in the two sectors. From this graph below, explain which sectors production is the largest and why.arrow_forward
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