Australia and New Zealand produce tanks and wine. Tanks are produced using capital and labor. Wine...

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Australia and New Zealand produce tanks and wine. Tanks are produced using capital and labor. Wine is produced using land and labor. Labor is mobile between sectors within a country. Australia is relatively abundant in capital, while New Zealand is relatively abundant in land. Consumers' preferences are the same in Australia and New Zealand. a) Draw the PPF of Australia and New Zealand in a diagram with the quantity of tanks on the x-axis. Clearly identify each of them. Explain why Australia and New Zealand PPFs differ. b) Draw the relative demand and the relative supply of tanks/wine for each country in autarky. Explain any difference across country. c) In a diagram draw the PPF, CPF and utility of Australia in the autarky equilibrium. Label the equilibrium using the letter A. Australia and New Zealand produce tanks and wine. Tanks are produced using capital and labor. Wine is produced using land and labor. Labor is mobile between sectors within a country. Australia is relatively abundant in capital, while New Zealand is relatively abundant in land. Consumers' preferences are the same in Australia and New Zealand. a) Draw the PPF of Australia and New Zealand in a diagram with the quantity of tanks on the x-axis. Clearly identify each of them. Explain why Australia and New Zealand PPFs differ. b) Draw the relative demand and the relative supply of tanks/wine for each country in autarky. Explain any difference across country. c) In a diagram draw the PPF, CPF and utility of Australia in the autarky equilibrium. Label the equilibrium using the letter A.

Answer rating: 100% (QA)

a The PPF Production Possibility Frontier represents the maximum combinations of tanks and wine that Australia and New Zealand can produce given their resources and technology Since Australia is relat... View the full answer