THE FOLLOWING PROBLEM IS DUE FOR HOMEWORK ON TUESDAY,
APRIL 28. You may NOT turn in this problem after class begins on
Thursday, April 30, because we will be going over this problem in
class.
NAME_______________________________
TOTAL POINTS = 40.
Alpha and Beta, two tiny islands, produce pigs and coconuts with labor
only. The following table showing labor productivity in each industry
outlines their respective technologies:
TECHNOLOGY
Labor Productivity: Output per unit of labor
PIGS COCONUTS
ALPHA 1.2 3
BETA 10 4
a. Which country has absolute advantage in the production of
pigs? Of coconuts? Explain briefly.
(4 points)
The technology above implies the following production possibilities
curves (PPC’s) for each country.
ALPHA’s PPC (10 units of labor) BETA’s PPC (5 units of labor)
PIGS COCONUTS PIGS COCONUTS
0 30 0 20
2 25 10 16
4 20 20 12
6 15 30 8
8 10 40 4
10 5 45 2
12 0 50 0
b. Graph each country’s PPC in the diagrams on page 4. (6
points)
