Answered: Answer the given question with a proper…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter2: Choice In A World Of Scarcity

Section: Chapter Questions

Problem 12RQ: Why is a production possibilities frontier typically drawn as a curve, rather than a straight line?

See similar textbooks

Related questions

Question

Answer the given question with a proper explanation and step-by-step solution.

Consider the rest of the world with free trade (production at S1 and consumption at C1 ), as shown in the graph on the right in figure 4.4A of your textbook. The international relative price of cloth now changes to 1.3 W/C.

a. Using a graph, show the effects of this change in the international relative price on production and consumption in the rest of the world.

b. Is this change in the international relative price an improvement or deterioration in the terms of trade of the rest of the world? According to your graph, does the rest of the world gain or lose well-being? Explain

Figure 4.4A

A. With Indifference Curves and Production-Possibility Curves
Wheat
80
50
40
N
S₂₁
So
O
0 20 40 60
A
United
States
B. With Demand and Supply Curves
Price of cloth (W/C)
Cloth
imports
20 40
Sus
B
Price =
1 W/C
60
Cloth
2 W/C
Dus
Cloth
Wheat
55
30
15
O
1
0.67
11/2
Price of cloth (W/C)
O
T
C₁
S₁
60 80 100
Cloth
exports
60 80 100
Rest of
the World
Price =
0.67 W/C
1 W/C
Sf
Cloth
Cloth

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 4 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions