Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Chapter 33, Problem 31P

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.

  1. 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.
  2. 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.
  • Chapter 33, Problem 31P, Review the numbers for Canada and Venezuela from Table 33.12 which describes how many barrels of oil

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    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. a. 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. b. 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 wanttogainfromtrading withVenezuela? Note: Wecanthinkofthis“ask”astherelativepriceor trade price of lumber. c. Is the Canadian “ask” you identified in (b) also beneficial for Venezuelans? Use…
    A country produces two goods: coconuts and umbrellas. Their production possibilities frontier (PPF) places coconuts on the x-axis and umbrellas on the y-axis. How would a drought that makes it difficult to grow coconuts but does not affect the production of umbrellas change the PPF? Neither the value of the x-intercept nor the y-intercept would change The value of the y-intercept would increase but the value of the x-intercept would not change The value of the x-intercept would increase but the value of the y-intercept would not change Both the value of the x-intercept and the y-intercept would increase The value of the y-intercept would decrease but the value of the x-intercept would not change The value of the x-intercept would decrease but the value of the y-intercept would not change
    Suppose that in a year an American worker can produce 60 shirts or 30 computers and a Chinese worker can produce 60 shirts or 12 computers. There are 1 million workers in each country. Use the blue line (circle symbol) to graph the production possibilities frontier (PPF) for the United States, and use the green line (triangle symbol) to graph the production possibilities frontier for China. Quantity of Computers (Millions) 30 27 24 21 18 15 12 9 6 3 0 0 10 20 30 40 50 60 70 Quantity of Shirts (Millions) 80 90 100 If these countries were open to trade, U.S. PPF O True O False China PPF U.S. without Trade Suppose that without trade the workers in each country spend half their time producing each good. True or False: There are no longer gains from trade. * Use the black point (plus symbol) to indicate this production and consumption point for the United States, and use the grey point (star symbol) to indicate this production and consumption point for China. China without Trade would…

    Chapter 33 Solutions

    Principles of Economics 2e

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