Problems3 - Name P ROBLEM S ET O NE Economics 452...

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Name P ROBLEM S ET O NE Economics 452 International Trade Theory and Policy 1. Home has 1200 units of labor available. It can produce two goods, apples and bananas. The unit labor requirement in apple production is 3, while in banana production it is 2. a. Write the equation for Home’s PPF (in labor constraint form with general notation, with numbers plugged in, and in slope-intercept form). Determine Home’s maximum production of apples and bananas. Graph Home’s production possibilities frontier (with bananas on the vertical axis, making sure to label both axes). 0 b. What is Home’s opportunity cost of apples in terms of bananas and what is its interpretation? Where does it appear in the PPF equation? c. In the absence of trade, what would the price of apples in terms of bananas be and why?
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2. Home is as described in problem 1. There is now another country, Foreign, with a labor force of 800. Foreign’s unit labor requirement in apple production is 5, while in banana production it is 1. a. Write the equation for Foreign’s PPF (in all three forms).
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This note was uploaded on 02/13/2012 for the course ECON 452 taught by Professor Vacaflores during the Fall '06 term at Texas A&M.

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Problems3 - Name P ROBLEM S ET O NE Economics 452...

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