Why increasing opportunity costs occur within economy

Assignment Help Business Economics

Reference no: EM131009952

Given a two country (A & B) and two goods (X & Y) model with identical endowments:

Draw the PPF for country A that displays increasing opportunity costs and also shows that country A produces more of good X.

In the same graph, draw the PPF for country B that displays increasing opportunity costs and also shows that country B produces more of good Y.

Now draw a trade line that is tangent to BOTH PPFs (i.e. the trade line touches the PPF’s at one point). Assume that the slope of the trade line is the world relative price of the two goods. Does trade occur given the above information? If so, how is it different from question 1 analysis (hint: the tangency points are the country’s production points. Look at the graph for the answer).

Explain why increasing opportunity costs occur within an economy, how this affects the PFF and therefore trade.

Reference no: EM131009952

Questions Cloud

Example of farmer and railroad tracks to explain bargaining : Ronald Coase used the example of a farmer and railroad tracks to explain bargaining. Sparks from trains running on tracks near farmland have the potential to set off fires in the fields. Consider the case where the law stipulated that railroads could..

Preferences stay constant across time : When the Smith family lived in Japan they consumed 4 lbs of rice per week and 2 lbs of potatoes per week. When the Smith family lived in Germany their consumption drastically changed to 4 lbs of potatoes per week and 2 lbs of rice per week. Although ..

Construction firms will submit sealed bids : A town wants to build a new bridge. Construction firms will submit sealed bids. The town will award the contract to the firm that submits the lowest bid and will pay the firm the amount of the second lowest bid (that is, the town will conduct a secon..

Why capital flows from more advanced-productive countries : Explain how and why the capital flows from the more advanced / productive countries in the Euro zone to the countries in the periphery helped (a) improve, or (b) did not help improve the current accounts positions of the countries in the periphery.

Why increasing opportunity costs occur within economy : Given a two country (A & B) and two goods (X & Y) model with identical endowments: Draw the PPF for country A that displays increasing opportunity costs and also shows that country A produces more of good X. Explain why increasing opportunity costs o..

Two countries and two goods model : Given two countries (Uganda & Botswana) and two goods (Cars and Shirts) model, suppose Uganda is endowed with ten million workers and each of its workers can produce either five cars or ten shirts per worker. Politicians decide to open to trade. Whic..

Cigarette-rolling machinery : In the early 1880’s cigarette-rolling machinery became available. Prior to this all rolling was done by hand. The machines dramatically cut the cost of rolling cigarettes. But they were not fully automatic—they needed the permanent presence of an ope..

Initial demand and supply curves for prescription drugs : Given the initial demand and supply curves for prescription drugs and an equilibrium price and (3) questions ) quantity, select from the list below the ones that the direction of change will be to the right. Consumers become more enamored with the wo..

User Account

All Pages