Macroeconomics
Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Chapter 2, Problem 3SPA
To determine

Identify the concept of increasing the opportunity cost.

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Indicate the equilibrium production and consumption point in autarky,using a PPF and a community indifference curve under increasing-opportunity-cost conditions. Why is this an equilibrium? What must occur for this country to gain from trade?
Consider the PPF of a country with movies on the horizontal axis and computers on the vertical axis. Show the effects of each of the following:  War results in a loss of life for one in eight prime-age males
Two planets, Endor and Kamino, both produce two goods, blasters and radio devices. The below graphs show the PPF curves of each planet before specialization. Initially, each planet produces 50,000 radio devices and 5,000 blasters. In total, 100,000 radios and 10,000 blasters are produced. Which planet has a comparative advantage in producing radios and which planet has a comparative advantage in producing blasters? If each planet was to fully specialize in producing one good, how many radios in total would be produced and how many blasters in total would be produced?       Suppose that the two planets trade 5,000 blasters for 90,000 radios. Graph and label the new points on each planet’s PPF using the graphs above. What is the outcome of specialization and trade for each planet?
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