Two countries, Athens and Troy, produce two goods, ships and food, according to the following production...
Two countries, Athens and Troy, produce two goods, ships and food, according to the following production functions:
1 ship = 4 capital + 2 labor
1 food = 1 capital + 3 labor.
Athens has 200 units of capital and 100 units of labor available to produce ships and food. Troy has 100 units of capital and 150 units of labor available to produce ships and food.
- Calculate the limits of production for Athens and Troy.
- Calculate the domestic terms of trade for Athens and Troy in terms of 1 ship.
- Based on your answer to question 2, which country should specialize in the production of which good? Why?
- Draw the production possibilities curves for each country based on your answers to questions 1 & 2.
- Draw the consumption possibilities curve for each country on the same graph you drew for question 4.
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Two countries, Athens and Troy, produce two goods, ships and
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Only the question a
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