PPF1614Without Trade12With Trade6.40.50100150200250300350400Wheat (millions of bushels)Now suppose that the United States offers to sell 10 million cars to Mexico in exchange for 150 million bushels of wheat.On the previous graph, use the grey point (star symbol) to indicate the consumption bundle Mexico can achieve with trade if it continues to consume200 million bushels of wheat.Мexicoaccept the deal the United States proposes.Cars (millions)10 Suppose that there are 7 million workers in Mexico and that each of these workers can produce either 2 cars or 50 bushels of wheat in a year.The opportunity cost of producing a car in Mexico isbushels of wheat, and the opportunity cost of producing a bushel of wheat in Mexico iscars.Use the blue line (circle symbol) to draw Mexico's production possibilities frontier (PPF) on the following graph. Then use the black point (plus symbol)to indicate the consumption bundle Mexico can achieve without trade if it chooses to consume 6 million cars.2018PPF161412Without Trade108With Trade100150200250300350400Wheat (millions of bushels)504-Cars (millions)

PPF 16 14 Without Trade 12 10 8 With Trade 6. 4. 2 50 100 150 200 250 300 350 400 Wheat (millions of bushels) Now suppose that the United States offers to sell 10 million cars to Mexico in exchange for 150 million bushels of wheat. On the previous graph, use the grey point (star symbol) to indicate the consumption bundle Mexico can achieve with trade if it continues to consume 200 million bushels of wheat. Mexico accept the deal the United States proposes. Cars (millions)

PPF 16 14 Without Trade 12 10 8 With Trade 6. 4. 2 50 100 150 200 250 300 350 400 Wheat (millions of bushels) Now suppose that the United States offers to sell 10 million cars to Mexico in exchange for 150 million bushels of wheat. On the previous graph, use the grey point (star symbol) to indicate the consumption bundle Mexico can achieve with trade if it continues to consume 200 million bushels of wheat. Mexico accept the deal the United States proposes. Cars (millions)

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter20: International Trade

Section: Chapter Questions

Problem 11QP

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3. Gains from trade Suppose there exist two imaginary countries, Everglades and Yosemite. Their labor forces are each capable of supplying four million hours per day that can be used to produce shorts, almonds, or some combination of the two. The following table shows the amount of shorts or almonds that can be produced by one hour of labor. Country Everglades Yosemite Shorts (Pairs per hour of labor) 5 8 Almonds (Pounds per hour of labor) 20 16 Suppose that initially Yosemite uses 1 million hours of labor per day to produce shorts and 3 million hours per day to produce almonds, while Everglades uses 3 million hours of labor per day to produce shorts and 1 million hours per day to produce almonds. As a result, Everglades produces 15 million pairs of shorts and 20 million pounds of almonds, and Yosemite produces 8 million pairs of shorts and 48 million pounds of almonds. Assume there are no other countries willing to engage in trade, so, in the absence of trade between these two…
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