Suppose there is international trade, and that because of developments abroad, the world price of blueberries...

 

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Suppose there is international trade, and that because of developments abroad, the world price of blueberries (relative to other goods and services) rises. Show using a PPC/CPC diagram (with blueberries on the horizontal axis and everything else on the vertical axis) how, if at all, this development will affect the U.S. PPC, the U.S. CPC, and U.S. production of blueberries and other goods and services. (Assume the U.S. has a conventional bowed out PPC for blueberries and everything else.) Suppose there is international trade, and that because of developments abroad, the world price of blueberries (relative to other goods and services) rises. Show using a PPC/CPC diagram (with blueberries on the horizontal axis and everything else on the vertical axis) how, if at all, this development will affect the U.S. PPC, the U.S. CPC, and U.S. production of blueberries and other goods and services. (Assume the U.S. has a conventional bowed out PPC for blueberries and everything else.)

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In this scenario if the world price of blueberries increases relative to other goods and services it would lead to an increase in the relative price o... View the full answer