Assume Nebraska and Virginia each have 100 acres of farmland. The following tabl

Question

Assume Nebraska and Virginia each have 100 acres of farmland. The following table gives hypothetical figures for yield per acre in the two states:

1) Who has the absolute advantage in the production of cotton?
2) 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 hte other good the the two countries could produce working together?

C) In VA, what is the marginal rate of transformation between wheat and cotton? (Assume wheat is graphed on the vertical axis).

Explanation / Answer

1) Nebraska

2) Virginia

B)

If wheat is 200, then we use 50 acres of virginia and hence have 50 acres for cotton and 100 acres of nebraska giving us 50 * 2 + 100 * 6 = 700

for 240 cotton we would use 40 acres of nebraska and hence would produce 60 * 8 + 100 * 4 = 880 of wheat

for 680 of cotton we use 100 acres of nebraska and 40 acres of virginia and produce 60 * 4 = 240 wheat

for 560 wheat we use 100 acres of virginia and 20 acres of nebraska and hence produce 80 * 8 = 640 wheat

marginal rate is 4/2 = 2

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.