Handout 1b key

Handout 1b key - Handout 1b Key for Numeric Exercise of...

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Handout 1b – Key for Numeric Exercise of Gains from Trade Spring 2007 Page 1 of 2 The following handout is a numeric exercise of opportunity cost and the gains from trade. U.S. Japan Computers (millions) Televisions (millions) Computers (millions) Televisions (millions) 20 0 10 0 10 25 5 30 0 50 0 60 By placing computers on the horizontal axis and televisions on the vertical axis, graph the production possibilities curve (PPC) for each country. Production Possibilities Curves for U.S. and Japan 0 10 20 30 40 50 60 0 1 02 03 04 05 06 0 televisions (millions) com puters (m illions) U.S. Production Possibilities Worldwide Consumption Possibilities Japanese Production Possibilities
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Handout 1b – Key for Numeric Exercise of Gains from Trade Spring 2007 Page 2 of 2 1. Calculate the opportunity cost for the U.S. to produce one more television. The opportunity cost for the U.S. to produce one more television is 20 computers/50 televisions = 2/5 computer per 1 television.
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Handout 1b key - Handout 1b Key for Numeric Exercise of...

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