Use the following table to answer Questions 1 and 2. The table shows the number of hours required to produce one unit of output of potatoes and fish in Denmark and Lithuania: | | Potatoes | Fish | | Lithuania | 6 | 8 | | Denmark | 10 | 4 |
- If Denmark has 1,000 hours of labor available, graph its production possibilities
frontier. Select some point on Denmark's PPF and label the point A.
- Suppose Denmark and Lithuania agree to trade at an international terms
of trade of 1 fish = 0.667 potatoes (or 1 potato = 1.5 fish). On Denmark's
PPF, label the post-trade production point B.
- Draw and label the consumption possibilities frontier.
- Select a point on the CPF that would represent an increase in consumption
of both goods relative to point A. Label the point C.
|