Which country is the more efficient producer of coffee

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Reference no: EM131240726

Suppose that by devoting all its resources to coffee production, Ethiopia can produce 6 tons of coffee, while if it devotes all its resources to peanut production, it can produce 2 tons of peanuts. Senegal can produce 2 tons of coffee if it devotes all its resources there, or 4 tons of peanuts if it grows only peanuts.

a. Draw the PPFs for Ethiopia and Senegal. (Put the quantity of coffee on the vertical axes.)

b. Which country is the more efficient producer of coffee? Explain how you got your answer.

c. Suppose that Ethiopia would like to consume 4 tons of coffee and 1 ton of peanuts, while Senegal would like to consume 2 tons of coffee and 3 tons of peanuts. Could either country consume their desired consumption bundle, without trade? Show on your graphs above.

d. If the countries trade, could they each get their desired consumption bundle? If so, how?

Reference no: EM131240726

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