Question: Using the data from problem 9, suppose that New Zealand has 300 million hours of labor per period, while India has 800 million hours. a.

Using the data from problem 9, suppose that New Zealand has 300 million hours of labor per period, while India has 800 million hours.

a. Draw PPFs for both countries for the two goods (put quantity of wool on the vertical axis).

b. Suppose that, before trade, each country uses half of its labor to produce wool and half to produce rugs. Locate each country’s production point on its PPF (label it A for New Zealand, and A' for India).

c. After trade opens up and each country completely specializes in its comparative advantage good, locate each country’s production point on its PPF (label it B for New Zealand, and B' for India).

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a The PPFs are as shown in this diagram b New Zealands pretrade production is at point A in ... View full answer

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