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Suppose that there are 10 million workers in Canada, and that each of these workers can produce either 2 cars or 30 tonnes of wheat
Suppose that there are 10 million workers in Canada, and that each of these workers can produce either 2 cars or 30 tonnes of wheat in a year. a. What is the opportunity cost of producing a car in Canada? What is the opportunity cost of producing a tonne of wheat in Canada? Show your calculations/logic. (10%) b. Draw Canada's production possibilities frontier (PPF). If you have wheat in your horizontal axes, what is the slope of the PPF you drew? (5%) c. If Canada chooses to consume 10 million cars, how much wheat can it consume without trade? Label C this point on your PPF curve. (10%) d. Now suppose that the United States offers to buy 10 million cars from Canada in exchange of 20 tonnes of wheat per car. If Canada continues to consume 10 million cars, how much wheat does this deal allow Canada to consume? Label D this point on your diagram. Should Canada accept the deal? (10%)
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