Your two countries are Switzerland and Chile and the two goods are cheese and wine

Practice #1

Your two countries are Switzerland and Chile and the two goods are cheese and wine. Using all of the resources available to them (land, labor, capital, time, etc.) here are the combinations of the two goods each country can achieve.

1. Graph the PPF for each country using the information in the table above.

2. Based upon the information given in the table above, answer the following questions:

   1. Switzerland’s opportunity cost to produce 1 unit of cheese is how many units of wine?

1. Switzerland’s opportunity cost to produce 1 unit of wine is how many units of cheese?

1. Chile’s opportunity cost to produce 1 unit of cheese is how many units of wine?

1. Chile’s opportunity cost to produce 1 unit of wine is how many units of cheese?

2. Which country has the absolute advantage in the production of cheese?

1. Which country has the absolute advantage in the production of wine?

1. Which country has the comparative advantage in the production of cheese?

1. Which country has the comparative advantage in the production of wine?

1. Based upon your answers (a-h) which country should specialize in the production of cheese? Why?

1. Based upon your answers (a-h) which country should specialize in the production of wine? Why?

1. Using the information from the table, choose an initial production point for each country and label this point (S) on the graphs you created in question 1. Next, fill in the chart that follows with appropriate specialization and trade terms so that each country is able to produce at a point beyond point “S” that you have chosen. After you find your trade terms and the final consumption points after trade, please demonstrate by labeling your new consumption point (N) on the graph created in question 1.

Practice #2

Your two countries are Australia and Liberia and the two goods are hats and lumber. Using all of the resources available to them (land, labor, capital, time, etc.) here are the combinations of the two goods each country can achieve.

1. Graph the two PPF for each country using the information in the table above.

2. Based upon the information given in the table above, answer the following questions:

   1. Australia’s opportunity cost to produce 1 unit of hats is how many units of lumber?

1. Australia’s opportunity cost to produce 1 unit of lumber is how many units of hats?

2. Liberia’s opportunity cost to produce 1 unit of hats is how many units of lumber?

1. Liberia’s opportunity cost to produce 1 unit of lumber is how many units of hats?

1. Which country has the absolute advantage in the production of hats?

1. Which country has the absolute advantage in the production of lumber?

1. Which country has the comparative advantage in the production of hats?

2. Which country has the comparative advantage in the production of lumber?

1. Based upon your answers (a-h) which country should specialize in the production of hats? Why?

1. Based upon your answers (a-h) which country should specialize in the production of lumber? Why?

1. Using the information from the table, choose an initial production point for each country and label this point (S) on the graphs you created in question 1. Next, fill in the chart that follows with appropriate specialization and trade terms so that each country is able to produce at a point beyond point “S” that you have chosen. After you find your trade terms and the final consumption points after trade, please demonstrate by labeling your new consumption point (N) on the graph created in question 1.

Practice #3:

Nicki and Drake are deciding how to split their time between writing music and lyrics for their new album. Their PPFs for 72 hours of work are show below. Nicki and Drake have to write music for 8 songs and lyrics for 12 songs (4 songs already have music). When they are done, they can go to a private island and relax from all their hard work. It is possible that they will use more than 72 hours.

Once they start writing lyrics and music, assuming their hired help packs for them and their plane is waiting outside their door, in how many hours can they board the plane to their relaxing island getaway?Explain.