Chapter 2 and 3 part 2

# Chapter 2 and 3 part 2 - Our Example Two countries the U.S...

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Our Example s Two countries: the U.S. and Japan s Two goods: computers and wheat s One resource: labor, measured in hours s We will look at how much of both goods INTERDEPENDENCE AND THE GAINS FROM TRADE 0 each country produces and consumes s if the country chooses to be self-sufficient s if it trades with the other country

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Production Possibilities in the U.S. s The U.S. has 50,000 hours of labor available for production, per month. s Producing one computer requires 100 hours of labor. INTERDEPENDENCE AND THE GAINS FROM TRADE 1 s Producing one ton of wheat requires 10 hours of labor.
4,000 5,000 3,000 Wheat (tons) The U.S. PPF The U.S. has enough labor to produce 500 computers, or 5000 tons of wheat, or any combination along the PPF. INTERDEPENDENCE AND THE GAINS FROM TRADE 2 100 2,000 1,000 500 200 300 400 0 Computers

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4,000 5,000 3,000 Wheat (tons) The U.S. Without Trade Suppose the U.S. uses half its labor to produce each of the two goods. Then it will produce and consume 250 computers and 2500 tons of wheat. INTERDEPENDENCE AND THE GAINS FROM TRADE 3 100 2,000 1,000 500 200 300 400 0 Computers
Use the following information to draw Japan’s PPF. s Japan has 30,000 hours of labor available for production, per month. s Producing one computer requires 125 hours of A C T I V E L E A R N I N G 1 Derive Japan’s PPF labor. s Producing one ton of wheat requires 25 hours of labor. Your graph should measure computers on the horizontal axis. 4

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Wheat (tons) 2,000 Japan’s PPF Japan has enough labor to produce 240 computers, or 1200 tons of wheat, r any combination INTERDEPENDENCE AND THE GAINS FROM TRADE 5 Computers 1,000 200 0 100 300 or any combination along the PPF.
Japan Without Trade Wheat (tons) 2,000 Suppose Japan uses half its labor to produce each good. Then it will produce and consume 20 computers and INTERDEPENDENCE AND THE GAINS FROM TRADE 6 Computers 1,000 200 0 100 300 120 computers and 600 tons of wheat.

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Consumption With and Without Trade s Without trade, s U.S. consumers get 250 computers
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Chapter 2 and 3 part 2 - Our Example Two countries the U.S...

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