15 Suppose workers in South Carolina and Indiana agreed to a

15. Suppose workers in South Carolina and Indiana agreed to a terms of trade of 1 bushel of corn for 2 bushels of soybeans. Which of the following represents an Indiana worker\'s production possibilities frontier (PPF) and consumption possibilities frontier (CPF)? Soybeans Soybeans 192 CPF CPF 96 PPF PPF CornSoybeans 96 Soybeans Corn 96 CPE CPF PPF PPF Corn Corn 192 96

Solution

Option (B) is correct. Because terms of trade between south california and Indiana is that 1 bushel of corn for 2 bushels of soyabeans. It implies that Indiana is importing soyabeans and exporting corns.