Assume Nebraska and Virginia each have 100 acres of farmland. The following table gives hypothetical figures for yield per acre in the two states:
Nebraska Virginia
Wheat 9 5
Cotton 7 2
A) Who has the absolute advantage in the production of cotton? Who has the comparative advantage in the production of wheat?
B) In this exercise, you will find actual points on the combined PPC of the two states. For each of the following values of one good, calculate the maximum amount of the other good that the two countries could produce working together.
Wheat Cotton
350 2
210
800
950
C) In Virginia, what is the marginal rate of transformation between wheat and cotton?