Ch02TradeSolutions - Homework 10 Chapter 2 Solutions 13. a)...

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Homework 10 Chapter 2 Solutions 13. a) The U.S. PPF is present in figure 13a.1 and Brazil’s PPF is presented in figure 13a.2. As can be seen by each of these graphs, if the U.S. produces 20 million gallons of ethanol then they can efficiently produce 80 million computers. If the Brazil produces 60 million gallons of ethanol, then they can efficiently produce 10 million computers. Hence the combined production is 80 million ethanol and 90 million computers. Figure 13a1 (U.S. PPF) Figure 13a2 (Brazil PPF)
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b) The U.S. opportunity cost for producing one additional gallon of ethanol is how many computers the U.S. can no longer produce because of the redistribution of resources: reduction in computers produced ( ) increase in gallons of ethanol produced ( ) = 1 month 1 month = 2 computers per 1 gallon of ethanol The Brazilian opportunity cost for producing one additional gallon of ethanol is how many computers Brazil can no longer produce because of the redistribution of resources: reduction in computers produced ( ) increase in gallons of ethanol produced ( ) = 1 month 1 month = 1 3 computers per 1 gallon of ethanol Brazil has the comparative advantage in ethanol production because their opportunity cost (what they give up to produce ethanol) is the lowest. c) The U.S. opportunity cost for producing one additional computer is how many gallons of ethanol the U.S. can no longer produce because of the redistribution of resources: reduction in gallons of ethanol produced ( ) increase in computers produced ( ) = 1 month 1 month = 1 2 gallons of ethanol per 1 computer
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This note was uploaded on 02/16/2012 for the course ECON 101 taught by Professor Gerson during the Fall '08 term at University of Michigan.

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Ch02TradeSolutions - Homework 10 Chapter 2 Solutions 13. a)...

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