Mexico and the U.S. can produce both shirts and computers as described in following table and displayed in plot. Mexico US Shirts Computers Shirts Computers Devote all resources to producing shirts 12 0 16 0 Devote all resources to producing computers 0 4 0 16 image.png 1. Fill in blanks. Mexico’s opportunity cost of producing 1 computer is shirts. The US’s opportunity cost of producing 1 computer is shirts. 2. Choose answer to fill in blank. The US has a comparative advantage in producing (shirts/computers). 3. Fill in blanks. The straight-line PPFs reveal (constant/increasing/decreasing) opportunity costs of production implying there (are/are not) diminishing returns to production. 4. Fill in blanks. Assume in autarky Mexico consumes 2 computers and the U.S. consumes 6 shirts. This implies that in autarky, Mexico consumes shirts and the US consumes computers. 5. If trade occurs at 2 shirts for every computer, and Mexico trades 6 shirts to the US, the US will provide computers in return. This implies Mexico will consume a total of shirts and computers, while the US will consume shirts and computers. 6. Fill in the blanks with the relevant numbers. B = , C = , D = , E = , F = , G = , H = , I = , J = , K = .

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter3: Interdependence And The Gains Rrom Trade

Section: Chapter Questions

Problem 2PA

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Mexico and the U.S. can produce both shirts and computers as described in following table and displayed in plot.

Mexico

Shirts

Computers

Shirts

Computers

Devote all resources to producing shirts

Devote all resources to producing computers

image.png

1. Fill in blanks. Mexico’s opportunity cost of producing 1 computer is shirts. The US’s opportunity cost of producing 1 computer is shirts.

2. Choose answer to fill in blank. The US has a comparative advantage in producing (shirts/computers).

3. Fill in blanks. The straight-line PPFs reveal (constant/increasing/decreasing) opportunity costs of production implying there (are/are not) diminishing returns to production.

4. Fill in blanks. Assume in autarky Mexico consumes 2 computers and the U.S. consumes 6 shirts. This implies that in autarky, Mexico consumes shirts and the US consumes computers.

5. If trade occurs at 2 shirts for every computer, and Mexico trades 6 shirts to the US, the US will provide computers in return. This implies Mexico will consume a total of shirts and computers, while the US will consume shirts and computers.

6. Fill in the blanks with the relevant numbers. B = , C = , D = , E = , F = , G = , H = , I = , J = , K = .

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