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# Refer to the table below It shows the number of hours it requires for Mexico and Venezuela to produce

Refer to the table below. It shows the number of hours it requires for Mexico and Venezuela to produce 1 bicycle and 1 bushel of bananas.

 Bicycles Bananas (bushels) Mexico 100 Labor Hours 5 Labor Hours Venezuela 90 Labor Hours 3 Labor Hours

1.If each country has a total of 9,000 labor hours to devote to the production of the two goods, draw the PPF for each country. Assume their PPFs are linear. Put Ac€A?BicyclesAc€?? on the horizontal axis and Ac€A?BananasAc€?? on the vertical axis. Be sure to identify the intercept values (max. values) on the graphs. (6 points) 2.Suppose each country allocates 70% of its labor hours to banana production and 30% to the production of bicycles. Complete the table below to show each countryAc€?cs output of the two products. (2 points)

 Bicycles Bananas (bushes) Mexico Venezula Total

3. Which country has an absolute advantage in the production of bicycles? Bananas production? (2 points) 4.Suppose the two countries specialize and trade. Who should produce bicycles and who should produce

bananas? (2 points)

5. If each country only produced what they specialize in, how much of that good will they produce? (2 points)

6. Suppose Mexico and Venezuela agree to trade so that in exchange for 1,200 bushels of bananas the exporter of bananas received 48 bicycles. What will be the gains from trade for each country? (6 points)

Apr 30 2020 View more View Less