ps2 - between countries.) c) Show how trade between the two...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
UNIVERSITY OF WISCONSIN Economics 101 – Fall 2005 Wei Zhang Problem Set 2 Due by September 19, 2005 (in class) Gains from Trade and the Production Possibilities Frontier 1. Suppose Australia and New Zealand each have 100 acres of land available for farming wheat and cotton. Yields per acre are listed in the following table. Yield Per Acre New Zealand Australia Wheat 6 bushels 2 bushels Cotton 2 bales 6 bales a) Graph the production possibilities frontier (PPF) for each country. b) Which country has the comparative advantage in wheat production? In cotton production? How do you know this? (Hint: Compare the opportunity costs for production of one bale of cotton and one bale of wheat
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: between countries.) c) Show how trade between the two countries can enable both to consume levels of cotton and wheat outside their respective production possibilities frontiers. Feel free to use an example. 2. Suppose instead that yields per acre were given by the following table: Yields Per Acre New Zealand Australia Wheat 6 bushels 1 bushels Cotton 6 bales 3 bales a) Graph the new production possibilities frontier (PPF) for each country. b) Which country has the comparative advantage in wheat production? In cotton production? c) Can the countries still gain from trade? If yes, please provide an example. If not, explain why....
View Full Document

This note was uploaded on 07/28/2010 for the course ECON 101 taught by Professor Hansen during the Fall '07 term at Wisconsin.

Page1 / 2

ps2 - between countries.) c) Show how trade between the two...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online