ex-gains from trade_sol

Ex-gains from - ECO 201 In-Class Exercise-Gains from Trade 4 Suppose that there are 10 million workers in Canada and that each of these workers can

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4. Suppose that there are 10 million workers in Canada and that each of these workers can produce either 2 cars or 30 bushels of wheat in a year. a. What is the opportunity cost of producing a car in Canada? What is the opportunity cost of producing a bushel of wheat in Canada? Explain the relationship between the opportunity costs of the two goods Opportunity cost of producing a car = 15 bushels of wheat Opportunity cost of producing a bushel of wheat= 1/15 car The opportunity cost of a car is the inverse of the opportunity cost of a bushel of wheat and vise versa [ Each worker, in Canada 2 car 30 bushels of wheat 1 car 30/2=15 bushels of wheat] b. Draw Canada’s production possibilities frontier. If Canada chooses to consumer 10 million cars, how much wheat can it consume without trade? Label this point on the production possibilities frontier. Production Possibilities Frontier of Canada
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This note was uploaded on 09/15/2009 for the course ECON 201 taught by Professor Shoonlai during the Summer '09 term at Miami University.

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Ex-gains from - ECO 201 In-Class Exercise-Gains from Trade 4 Suppose that there are 10 million workers in Canada and that each of these workers can

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