PRINCIPLES OF MICROECONOMICS LOOSE LEAF
PRINCIPLES OF MICROECONOMICS LOOSE LEAF
12th Edition
ISBN: 9780134081083
Author: CASE
Publisher: PEARSON
Question
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Chapter 20, Problem 2.1P

(a)

To determine

The production possibility curve in the absence of trade.

(b)

To determine

Identify the role of transportation costs in trade.

(c)

To determine

Identify the role of the trade agreement in the exchange process.

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Nigeria and Singapore both produce paper and pens. It takes Nigeria four labor hours to produce a box of paper and half hour to produce a pen. In Singapore, production of each takes three labor hours. Assume both countries have 12 labor hours for simplicity. _________has absolute advantage in the production of paper. ________ has comparative advantage in the production of paper. Hence, ______ should export pens. To benefit both countries, the price of a pen should be between __ and __ boxes of paper.   Fill in the blanks.
Please no written by hand solutions Suppose Latvia and Estonia each produce only two goods, tractors and bobsleds. Both are produced using labor alone. Assuming both countries are at full employment, you are given the following information: Latvia: 20 units of labor required to produce 1 tractor 8 units of labor required to produce 1 bobsled Total labor force: 1,000,000 units Estonia: 15 units of labor required to produce 1 tractor 30 units of labor required to produce 1 bobsled Total labor force: 750,000 units Draw the production possibility frontiers for each country in the absence of trade. 1.) Using the line drawing tool, draw the production possibility frontier for Latvia. Properly label your line. 2.) Using the line drawing tool, draw the production possibility frontier for Estonia. Properly label your line. Carefully follow the instructions above and only draw the required objects. If transportation costs are ignored and trade is allowed, Estonia and Latvia will not engage in…
The graph below shows the short-run production possibilities frontier for a hypothetical country whose currency is the U.S. dollar. This country chooses to produce the mix of capital and consumer goods indicated by point A. This leads to a long-run expansion of the production possibilities frontier, with a 20% increase in production capacity for both consumer and capital goods.Use the curved-line tool to draw the new production possibilities frontier. Point A happens to coincide with the middle control point of the short-term curve; use that to help you decide where the curved-line tool's middle control point of the long-term curve should go (do not use the point tool to plot a point).
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