2. A developing economy requires 1,000 hours of work to produce a television set and 10 hours of work to produce a bushel of corn. This economy has available a total of 1,000,000 hours of work per day. (LO2)

a. Draw the PPC for daily output of the developing economy. Give numerical values for the PPC’s vertical intercept, horizontal intercept, and slope. Relate the slope to the developing country’s opportunity cost of producing each good. If this economy does not trade, what are its consumption possibilities?

b. The developing economy is considering opening trade with a much larger, industrialized economy. The industrialized economy requires 10 hours of work to produce a television set and 1 hour of work to produce a bushel of corn. Show graphically how trading with the industrialized economy affects the developing economy’s consumption possibilities. Is opening trade desirable for the developing economy? (Hint: When it opens to trade, the developing economy will be fully specialized in one product.)