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Microsoft Word - HW1 ak

Microsoft Word - HW1 ak - Problem Set#1 1 Consider an...

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Problem Set #1 1. Consider an economy with 3 regions, each with 100 units of labor that can be employed to produced corn or computers. In region A, each unit of labor can produce 3 units of corn or 1 unit of computers. In region B, each unit can produce 2 units of computers or 1 unit of corn. In region C, each unit can produce 1 unit of computers or 1 unit of corn. a. What is the opportunity cost of corn in region A? region B? region C? A= 1/3 B= 2 C= 1 b. Draw the joint PPF for corn and computers. When the production of corn increases, what happens to the opportunity cost of corn? Why? c. Suppose that with no trade each region spends half of its labor on corn and half on computers. Show this point in your picture from part b. What points in the picture show strictly greater amounts of corn AND computers resulting from trade?
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2. Assume that the world economy is composed of only two countries (Canada and the United States) and only two goods (steel and wheat). The table below reports the number
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