Economics 0115
Homework #4: Answers
1. Given the data on the production possibility frontiers for the US and Japan in Table 1-1, do the following:
a. Construct a table showing the opportunity costs for producing food and autos in each country. Which country has the comparative advantage in producing food? In producing autos? Explain.
b. Draw each country's production possibility frontier (PPF) on a separate graph. Using autos on the vertical axis, calculate the slopes of these two PPFs.
2. Assume that the terms of trade (TOT) are set at 1F = 1A. a. Given the TOT, indicate what will happen to the production of A and F in each country.
b. Given the terms of trade, draw the consumption possibility frontiers (CPF) for the US and Japan.
