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Questions and Answers
How many hours of labor does the U.S. have available for production per month?
50,000 hours
How many hours of labor are required to produce one computer in the U.S.?
100 hours
How many hours of labor are required to produce one ton of wheat in the U.S.?
10 hours
What is the maximum number of computers the U.S. can produce with its available labor?
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If the U.S. uses half its labor to produce each good, how many computers and tons of wheat does it produce?
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How many hours of labor does Japan have available for production per month?
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How many hours of labor are required to produce one computer in Japan?
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How many hours of labor are required to produce one ton of wheat in Japan?
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What is the maximum number of computers Japan can produce with its available labor?
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If Japan uses half its labor to produce each good, how many computers and tons of wheat does it produce?
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If the U.S. produces 3,400 tons of wheat, how many computers can it produce with its remaining labor?
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If Japan produces 240 computers, how many tons of wheat will it produce?
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Study Notes
Trade example: The U.S. and Japan
- Two countries: The US and Japan
- Two goods: Computers and wheat
- One resource: Labor, measured in hours
- Two scenarios: Self sufficiency & trade
Production Possibilities Frontier (PPF)
- The US has 50,000 hours of labor available
- Producing one computer requires 100 hours of labor
- Producing one ton of wheat requires 10 hours of labor
US PPF
- The US can produce 500 computers or 5,000 tons of wheat
- The US can produce any combination of computers and wheat along its PPF
- The US PPF shows it can produce a maximum of 500 computers or 5,000 tons of wheat, depending on the allocation of labor.
- The US PPF is bowed outward due to increasing opportunity costs. As production shifts from computers to wheat, the amount of computers that can be produced decreases at an increasing rate.
The US without trade
- The US produces and consumes 250 computers and 2,500 tons of wheat
- This is achieved when the US uses half its labor to produce each good.
Japan's PPF
- Japan has 30,000 hours of labor available
- Producing one computer requires 125 hours of labor
- Producing one ton of wheat requires 25 hours of labor
- Japan can produce 240 computers or 1,200 tons of wheat
- Japan can produce any combination of computers and wheat along its PPF
Japan without trade
- Japan produces and consumes 120 computers and 600 tons of wheat
- This is achieved when Japan uses half its labor to produce each good.
Consumption with and without trade
- Without trade, the US consumes 250 computers and 2,500 tons of wheat
- Without trade, Japan consumes 120 computers and 600 tons of wheat
Production under trade
- The US produces 3,400 tons of wheat
- The US can produce 160 computers with the remaining labor.
- Japan produces 240 computers
- Japan produces 0 tons of wheat
US Production with trade
- Producing 3,400 tons of wheat requires 34,000 labor hours.
- The remaining 16,000 labor hours are used to produce 160 computers.
Japan's Production with trade
- Producing 240 computers requires all of Japan’s 30,000 labor hours.
- Japan produces 0 tons of wheat.
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Description
Explore the trade dynamics between the U.S. and Japan, focusing on production possibilities and labor allocation. Understand the concept of Production Possibilities Frontier (PPF) as it relates to computers and wheat production, along with implications for self-sufficiency and trade. This quiz will enhance your grasp of economic principles in international trade.
