Based on the PPF for country A and B answer the following qu

Based on the PPF for country A and B, answer the following questions:

1a. Which country has the absolute advantage in cars? Explain. (1 points)

1b. What is the opportunity cost of producing one more unit of fish for the nation you identified in 1a? (1 point)

1c. Given the terms of trade for one unit of fish for two units of cars, answer the following questions: (2 points)

Would the terms of trade be beneficial for country A?

Would the terms of trade be beneficial for country B?

1d. Which country should import fish? (1 point)

1e. Suppose country A’s productivity doubles for fish and cars, answer the following questions:

Which country has the absolute advantage in producing cars? Explain. (1 points)

Which country has the comparative advantage in producing fish? Explain. (1 points)

2. Using the following tables, answer the questions associated with each PPF. (5 points each)

a. Time to complete given chore

Mike

Debbie

Vacuum a room

60 minutes

45 minutes

Wash a load of dishes

30 minutes

45 minutes

    i.       Is this an input or output problem?

   ii.       Does either person have an absolute advantage? Which chore?

   iii.       What are Debbie and Mike’s opportunity costs of vacuuming?

   iv.       What are Debbie and Mike’s opportunity costs for washing dishes?

   v.       Who should do what chore and why?

b. Time to produce

Poland

Ukraine

Cars

12

10

Computers

4

6

    i.       Is this an input or output problem?

   ii.       Does either person have an absolute advantage? Which chore?

   iii.       What are the opportunity costs for computers for both countries?

   iv.       What are the opportunity costs for cars for both countries?

   v.       Which nation should produce which product and why?

	Mike	Debbie
Vacuum a room	60 minutes	45 minutes
Wash a load of dishes	30 minutes	45 minutes

Solution

1a. Which country has the absolute advantage in cars? Explain.

Country B because if it uses all its resources in the production fo cars, it can produce 60 cars while country A can prdouce 50 cars.

1b. What is the opportunity cost of producing one more unit of fish for the nation you identified in 1a?

3 cars (60/20 = 3)

1c. Given the terms of trade for one unit of fish for two units of cars, answer the following questions:

Would the terms of trade be beneficial for country A?

No, because its opportunity cost of getting one unit of fish is one car. (50/50)

Would the terms of trade be beneficial for country B?

Yes, because its opportunity cost of getting one unit of fish is 3 cars (60/20)

1d. Which country should import fish?

Country B

1e. Suppose country A’s productivity doubles for fish and cars, answer the following questions:

Which country has the absolute advantage in producing cars? Explain.

Country A (It will be 100 for country A and 60 for country B)

Which country has the comparative advantage in producing fish? Explain.

Country A (Compare the quanties for two goods in two countries. (Fish = (100/20 = 5) (Cars = 100/60 = 1.66)