Suppose there are only two countries in our world - Zooboolooland (we can call it 'Z' for
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Suppose there are only two countries in our world - Zooboolooland (we can call it 'Z' for short) and Econotopia (we can call it 'E' for short). Zooboolooland and Econotopia both have the ability to produce two goods, widgets and sandals. In a year Zooboolooland can produce 100 widgets OR 500 sandals while Econotopia can produce either 150 widgets OR 400 sandals.
- Draw the Production Possibility Curves which represents the above information.
- If they were to specialise in the production of one good over the other, in which good should each country specialise? Explain.
- Assume currently each country spends half the year producing widgets and half the year producing sandals - would specialising and trading help both of these countries? Explain.
- Graphically represent your answer from (c).
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