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Unformatted text preview: massive disruptions in the Cuban economy Since Cuba allocated all of its production to sugar, it produced at the "sugar corner" of its PPF. At that corner, the opportunity cost of producing sugar exceeds the relative price of sugar. For simplicity, let's pretend that Cuba: x succeeded in producing all 10 million tons of sugar, but didn't produce anything else x at a relative price of sugar else everything 1 , Cuba traded 6 million tons of sugar for 6 million tons of everything else and x consumed 4 million tons of sugar and 6 million tons of everything else So (in this example) Cubans consumed the same amount of sugar, but their consumption of everything else fell from 7 million tons to 6 million tons – a 15 percent decrease. Page 30...
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This note was uploaded on 12/29/2011 for the course ECO 311 taught by Professor Willis during the Fall '10 term at SUNY Stony Brook.
- Fall '10