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1. The accompanying Production Possibilities Frontiers (PPF) represent hypothetical levels of production for Honduras and Brazil. Assume the two countries are initially producing and consuming in autarky at point A on each of their PPF's. Suppose these countries decide to trade. Each country will specialize in the production of a good for which it has a comparative advantage.

What will each country produce?

A.Honduras will produce both goods.

B. Honduras will produce Steel and Brazil bananas.

C. Honduras will produce bananas and Brazil steel.

D. Brazil will produce both goods.

 

Honduras's PPF Brazil's PPF 10,000 10,000 9,000 9,000 8,000 8,000 Post Trade Consumption 7,000 7,000 .000 000 5,000 5.000 9.000 1,000 3,000 3,000 Post Trade Consumption 2,000 2,000 1,000 1,000 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 Steel (in tons) 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 Steel (in tons)

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Retselisitsoe Pokothoane
Retselisitsoe PokothoaneLv10
11 Jan 2021

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Related questions

Suppose that the U.S. and Brazil produce only two goods --- computer and coffee. The table below gives its production possibilities.

Computer Opp Cost Coffee Opp Cost

U.S.: 12 4

Brazil: 5 10

1. Draw the graphs of the production frontier for each country. Make sure that you level the diagram properly and indicate the name of the country under the graph.

2. What are the opportunity costs of producing each good in the two countries? List them in the table.

3. On which good each country has a comparative advantage?

4. Which country exports computers? Coffee?

5. What is the range of TOT in which only Brazil gains from trade?

6. What is the range of TOT in which only the U.S. gains from trade?

7. What is the range of TOT in which both countries gain from trade?

The figure below shows the production possibilities frontiers for Luxembourg and Thailand. Each country produces two goods, chairs and HDTVs. Assume both countries have the same resources. Luxembourg Thailand Chairs Chain HDTV HDTV Opportunity Cost of Production Chairs HDTVS Luxembourg Thailand c) (2 points) Suppose the two countries now decide to specialize and trade. Who should produce chairs and who should produce HDTVs? Complete the table below to show each country's output with specialization.

PART B – Questions 10 – 27 Use the following assumptions to answer all questions: • There are three countries – Argentina, Britain and Canada. • Each country produces and consumes two kinds of goods – crude oil and beef. • All countries make their goods from a single type of input – labor – and each country has 700 hours of labor available to produce crude oil and beef. • Each country demands 5 (five) barrels of crude oil. This assumption simply means that a country must have exactly 5 barrels of crude oil – it may produce them domestically, it may import them from abroad, or it makes some domestically and imports the rest. • Countries produce goods using the technology described in the table below Technology Hours of labor needed to produce one unit of good Using the above assumptions, answer the following questions: • Calculate the quantities of crude oil and beef produced in each country in autarky (when they do not trade and each country produces its own crude oil and beef) • Order the countries according to their absolute advantage in production of crude oil • Order the countries according to their absolute advantage in production of beef • Consider the case where countries are free to specialize and trade. In the table below calculate each country’s opportunity cost of producing one unit of each good. • Calculate the quantities of crude oil and beef produced in each country, consistent with the country’s comparative advantage. Based on the above calculations, answer questions 10 through 27: Consider autarky, when countries do not trade and each country produces its own crude oil and beef. 10. In autarky, Argentina produces _____ barrels of oil. a. 0 b. 5 c. 10 d. 15 11. In autarky, Britain produces _____ barrels of oil. a. 0 b. 5 c. 10 d. 15 12. In autarky, Canada produces _____ barrels of oil. a. 0 b. 5 c. 10 d. 15 13. In autarky, Argentina produces _____ pounds of beef. a. 0 b. 70 c. 150 d. 400 14. In autarky, Britain produces _____ pounds of beef. a. 0 b. 70 c. 150 d. 400 15. In autarky, Canada produces _____ pounds of beef. a. 0 b. 70 c. 150 d. 400 16. Country of _____ has absolute advantage in production of crude oil. a. Argentina b. Britain c. Canada d. No country 17. Country of _____ has absolute advantage in production of beef. a. Argentina b. Britain c. Canada d. No country Consider effects of specialization, when countries are allowed to trade. 18. When countries specialize, Argentina produces _____ barrels of oil. a. 0 b. 5 c. 10 d. 15 19. When countries specialize, Britain produces _____ barrels of oil. a. 0 b. 5 c. 10 d. 15 20. When countries specialize, Canada produces _____ barrels of oil. a. 0 b. 5 c. 10 d. 15 21. When countries specialize, Argentina produces _____ pounds of beef. a. 0 b. 700 c. 150 d. 400 22. When countries specialize, Britain produces _____ pounds of beef. a. 0 b. 700 c. 150 d. 400 23. When countries specialize, Canada produces ____ pounds of beef. a. 0 b. 700 c. 150 d. 400 24. Country of __C___ has comparative advantage in production of crude oil. a. Argentina b. Britain c. Canada d. No country 25. Country of ___A__ has comparative advantage in production of beef. a. Argentina b. Britain c. Canada d. No country 26. Countries gain from trade because specialization increases ____. a. Trade deficit b. Unemployment c. Efficiency d. Inflation 27. Countries should trade with trading partners that _____. a. Are equally technologically advanced b. Use superior technology in every industry c. Use less advanced technology in every industry d. Use different technologies, because trade benefits all

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