Question

Suppose that in a year an American worker can produce 80 shirts or 20 computers and a Chinese worker can produce 60 shirts or 20 computers. There are 1 million workers in each country. Use the blue line (circle symbol) to graph the production possibilities frontier (PPF) for the United States, and use the green line (triangle symbol) to graph the production psies frontier for China 30 27 24 21 18 China PPF 15 U.S. without Trade China without Trade 0 20 30 40 50 60 70 80 90 100 Quantity of Shirts (Millions) Suppose that without trade the workers in each country spend half their time producing each good Use the black point (plus symbol) to indicate this production and consumption point for the United States, and use the grey point (star symbol) to indicate this production and consumption point for China. If these countries were open to trade from trade. would export shirts and ▼ would benefit

Answer 1

Given one year production of the two countries are

	Shirt	Computers
America	80	20
China	60	20

If both countries using their student with one months time then

	Shirt	Computers
America	80 mn	20 mn
China	60 mn	20 mn

Now calculate opportunity cost

	1 unit of Shirt	1 unit of computers
America	0.25 Computer	4 units of shirt
China	0.33 computer	3 units of shirt

America should produce only shirt while china should produce only computers.

If countries were open to trade America should export shirt and China would benefit from Trade.

Highest price = 3 shirts per computers.

Lowest price = 0.25 computers per shirt.

When both countries efficiency is same then none of the countries would get benefited.

True.

I cannot use you interactive tool so it i am attaching the picture below for your reference

The points on the PPF represents the current consumption of both the countries.

Please contact if having any query thank you .

US-China PPF 25 20 o 10 5 0 0 20 40 60 80 100 Shirts