| Chapter
6 |
Draw
a production possibilities frontier that is bowed out from the origin.
Draw a community indifference curve that is just tangent to the PPF, and
label it CI1.
Draw a straight line (the slope of which represents the autarky relative
price of good X in terms of good Y) that passes through this point of
tangency, and label it (Px/Py)1.
This point represents autarky equilibrium. Label it "E."
Click here
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Graph
the following curves by clicking here
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a.
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How much of good X does this country produce and consume? Label this amount
x1
on the horizontal axis.
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b.
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How
much of good X does this country produce and consume? Label this amount
y1
on the vertical axis.
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c. |
Suppose
that when trade commences the international relative price of X in terms
of Y is lower than the autarky price ratio. Draw this new price line, labeling
it (Px/Py)2. |
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d.
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How
does this change the country's production mix? Label the new production
point E, and label the amount of good X that is produced x2
on the horizontal axis, and the amount of good Y that is produced y2
on the vertical axis.
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e.
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Draw
a new community indifference curve (label it CI2)
that is
i. further from the origin than
CI1 and is
ii. tangent to the international price line (Px/Py)2.
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f.
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Label
the new consumption point C,
and label the amount of good X that is consumed x3
on the horizontal axis, and the amount of good Y that is consumed y3
on the vertical axis.
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g.
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Which
good does this country export? How much does it export?
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h.
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Which
good does this country import? How much does it import?
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View
graphing answers to question 1 by clicking  |
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View
text answers to question 1 by clicking |