Suppose that there are two products: clothing and
soda. Both Brazil and the United States produce each product. Brazil can
produce 100,000 units of clothing per year and 50,000 cans of soda. The United
States can produce 65,000 units of clothing per year and 250,000 cans of
soda. Assume that costs remain constant. For this example, assume that the
production possibility frontier (PPF) is a straight line for each country
because no other data points are available or provided. Include a PPF graph for
each country in your paper.
Complete the following:
·
What would be the production
possibility frontiers for Brazil and the United States?
·
Without trade, the United
States produces AND CONSUMES 32,500 units of clothing and 125,000 cans of soda.
·
Without trade, Brazil produces
AND CONSUMES 50,000 units of clothing and 25,000 cans of soda.
·
Denote these points on each
COUNTRY’s production possibility frontier.
·
Using what you have learned
and any independent research you may conduct, which product should each country
specialize in, and why?
To assist in your thinking and discussion,
additional questions to consider include:
·
What is the labor-intensive
good?
·
What is the Marginal Rate of
Transformation impact?
·
What is the labor-abundant
country?
·
What is the capital-abundant
country?
·
Could trade help reduce
poverty in Brazil and other developing countries?
