Access over 20 million homework & study documents
search

managerial economics

Content type

User Generated

Type

Study Guide

Rating

Showing Page:
1/4
Suppose that there are two products: clothing and soda. Both Brazil and the United States
produce each product. Brazil produces 100,000 units of clothing per year and 50,000 cans
of soda. The United States produces 65,000 units of clothing per year and 250,000 cans of
soda. Assume that costs remain constant.
What would be the production possibility frontiers for Brazil and the United States?
Answer:
Production possibility frontier for Brazil:

Sign up to view the full document!

lock_open Sign Up
Showing Page:
2/4
Production possibility frontier for United States:
Without trade, the United States produces 45,000 units of clothing and 150,000 cans of
soda. Without trade, Brazil produces 75,000 units of clothing and 30,000 cans of soda.
Denote these points on each other’s production possibility frontier.
Answer:
The without trade production point of Brazil has been represented by point A in first figure. And
the without trade production point of United States has been represented by point B in figure 2.
What is the marginal transformation rate for each country?
Answer:
Marginal rate of transformation for Brazil = 100000/50000 = 2 units of cloth
Marginal rate of transformation for United States = 65000/250000 = 0.26 units of cloth
Should the two countries specialize and trade?
Answer:
Since marginal rate of transformation is different between two countries, we say that there is
scope for the two countries to specialize and trade.

Sign up to view the full document!

lock_open Sign Up
Showing Page:
3/4

Sign up to view the full document!

lock_open Sign Up
End of Preview - Want to read all 4 pages?
Access Now

Unformatted Attachment Preview

Suppose that there are two products: clothing and soda. Both Brazil and the United States produce each product. Brazil produces 100,000 units of clothing per year and 50,000 cans of soda. The United States produces 65,000 units of clothing per year and 250,000 cans of soda. Assume that costs remain constant. What would be the production possibility frontiers for Brazil and the United States? Answer: Production possibility frontier for Brazil: Production possibility frontier for United States: Without trade, the United States produces 45,000 units of clothing and 150,000 cans of soda. Without trade, Brazil produces 75,000 units of clothing and 30,000 cans of soda. Denote these points on each other's production possibility frontier.? Answer: The without trade production point of Brazil has been represented by point A in first figure. And the without trade production point of United States has been represented by point B in figure 2. What is the marginal transformation rate for each country? Answer: Marginal rate of transformation for Brazil = 100000/50000 = 2 units of cloth Marginal rate of transformation for United States = 65000/250000 = 0.26 units of cloth Should th ...
Purchase document to see full attachment
User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Anonymous
Excellent! Definitely coming back for more study materials.

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4