Question

2. The following are production possibilities tables for New Zealand and Spain. Answer the questions that follow using the information in the tables. Although it is not necessary, you may find it beneficial to graph the tables in order to answer the questions. (26 points) New Zealand's Production Possibilities Table (Millions of Bushels) Product Production alternatives B 0 15 10 20 60 Apples Plums 5 Spain's Production Possibilities Table (Millions of Bushels) Product Production alternatives 20 Apples Plums 60 0 60 40 a. What is New Zealand's opportunity cost of producing any amount of apples? (2 points) b. What is New Zealand's opportunity cost of producing any amount of plums? (2 points) c. What is Spain's opportunity cost of producing any amount of apples? (2 points) d. What is Spain's opportunity cost of producing any amount of plums? (2 points) e. Does either country possess an absolute advantage? Which one and why? (2 points) f. New Zealand should specialize in the production of the production of e in the polinesion of _and Spain should specialize in g. If the nations do not specialize and trade but remain at alternative C and S, the combined production will be apples and plums. (4 points) h. However, if the two nations specialize, the combined production will be and _bushels of plums. (4 points) bushels of apples i. bushels and the total If the two countries specialize and trade, the total gain in apples will be gain in plums will be bushels. (4 points)

Answer 1

New? realand's oppcost of , Apple = 0.25 Plums naland's app cost of spluns = 4 Apples Spain's opp cost of , Apple = Plums Sparns opp cost of I plums = 1 Apples Yes, spains has an absolute advantage in Plums NZ should specialize in prod" of Apples 4 Spanis showed " " " of plums. combined Apple proda = 60+20=60 combined Pleno prod" =5+40=45 Ab the specie alzarsi, Apples = 60 & Plurs= 66 gain in Apple = o bushels. gain in plums = 15 bushels