Problem: Suppose there are two countries, Busytown and Lazyasiwannabe, with the following production possibility tables:
Busytown
|
% of Resources
Devoted to
Cars
|
Cars Produced
(thousands)
|
Gourmet
Meals Produced
(thousands)
|
|
100%
|
60
|
0
|
|
80
|
48
|
10
|
|
60
|
36
|
20
|
|
40
|
24
|
30
|
|
20
|
12
|
40
|
|
0
|
0
|
0
|
Lazyasiwannabe
|
% of Resources
Devoted to
Cars
|
Cars Produced
(thousands)
|
Gourmet
Meals Produced
(thousands)
|
|
100%
|
50
|
0
|
|
80
|
40
|
10
|
|
60
|
30
|
20
|
|
40
|
20
|
30
|
|
20
|
10
|
40
|
|
0
|
0
|
50
|
a. Draw the production possibility curves for each country.
b. Which country has the absolute advantage in producing cars? In producing gourmet meals?
c. Which country has the comparative advantage in producing cars? In producing gourmet meals.