PPF and Trade 1 Using the information in the table below, draw each country's production possibilities frontier. Place wheat (W) on the vertical axis. US Italy Wheat Shoes Wheat Shoes 500 0 400 0 400 50 320 20 300 100 240 40 200 150 160 60 100 200 80 80 0 250 0 100

PPF and Trade 2 Fill in the following table: Wheat (bushels)

US 500

Italy 400 Shoes (pairs)

US 250

Italy 100 Cost of 1 Bushel of Wheat

-- Cost of 1 Pair of Shoes

-- Answer the questions below, using numbers to support your answer wherever possible. a. Which country is more efficient at producing wheat? Explain. b. Which country is more efficient at producing shoes? Explain. c. Who will produce shoes? Wheat? d. Would the US be willing to trade a pair of shoes for a bushel of wheat? Explain. e. Would Italy be willing to trade 1 bushel of wheat for a pair of shoes? Explain. f. What are the terms of trade that would be mutually acceptable to both countries?

PPF and Trade 3

The US can produce 500 cars (C) or 1500 televisions (T). Germany can produce 800 cars (C) or 400 televisions (T). a. Which country has an absolute advantage in car production? Television production? Explain your reasoning (use numbers). b. Which country has a comparative advantage in car production? Television production? Explain your reasoning (use numbers). c. Assuming that each country specializes in what it does best, which, if either, would be willing to trade at the rate of 1 car for 1 television? Use each country's PPF to explain your reasoning (put C on the vertical axis).

PPF and Trade 4

The US can produce 250 microwave ovens (M) or 500 cameras (C), while Japan can produce 300 microwave ovens (M) or 300 cameras (C). Use numbers to support you answers to each of the following questions. a. Which country has an absolute advantage in microwave oven production? Camera production? Explain your reasoning (use numbers). b. Which country has a comparative advantage in microwave oven production? Camera production? Explain your reasoning (use numbers). c. Assuming that each country specializes in what it does best, which, if either, would be willing to trade at the rate of 1 microwave oven for 2 cameras? Use each country's PPF to explain your reasoning (put M on the vertical axis).