Production Possibility Charts
1. Draw a production possibilities curve for Mexico.
2. Use the two above charts to answer the following questions.
Assume no investment or other goods are produced or consumed.
Assume relationships between pizza and beer are linear.
a. What is the opportunity cost of pizza in terms of beer in the US?
b. What is the opportunity cost of pizza in terms of beer in Mexico?
c. If the US produced 6 pizzas, how much beer could it produce?
d. Assume that pre-trading, the US is producing 2 pizzas and 8 beers. Give an example of how trading with Mexico would make the US better off.
II. Reading Economics for Life, Lesson 61, might be helpful in your answers.
A. Do economists generally believe international trade to be a good thing? Why?
B. Why is it that special interest groups are able to protect themselves from foreign trade to the determent of everyone else?
C. Give an example of a free trade restriction that benefits most people in an economy why does it benefit most people?