Suppose that there are 10 million workers in South Korea and that each of these workers can produce either two cars or 30 bags of wheat in a year.

a What is the opportunity cost of producing a car in South Korea? What is the opportunity cost of producing a bag of wheat in South Korea? Explain the relationship between the opportunity costs of the two goods.

b Draw South Korea’s production possibilities frontier. If South Korea chooses to consume 10 million cars, how much wheat can it consume without trade? Label this point on the production possibilities frontier.

c Now suppose that Thailand offers to buy 10 million cars from South Korea in exchange for 20 bags of wheat per car. If South Korea continues to consume 10 million cars, how much wheat does this deal allow South Korea to consume? Label this point on your diagram. Should South Korea accept the deal?