Question

American and Japanese workers can each produce 4 cars a year. An American worker can produce 10 tons of grain a year, whereas a Japanese worker can produce 5 tons of grain a year. To keep things simple, assume that each country has 100 million workers.

Construct a world production possibilities frontier, assuming our world consists of only the U.S. and Japan.

5.1 What is the maximum amount of grain our world could consume if the world wished to consume 200 million cars? _____million tons of grain

5.2 What is the maximum amount of grain our world could consume if the world wished to consume 400 million cars? _____million tons of grain

5.3 What is the maximum amount of grain our world could consume if the world wished to consume 600 million cars? _____million tons of grain

5.4 If 200 million cars are consumed, describe the mix of world production:

a. The US produces only cars, while Japan produces both cars and grain

b. The US produces both cars and grain, while Japan produces only cars

c. The US produces only grain, while Japan produces both cars and grain

d. The US produces only grain, while Japan produces only cars.

5.5 If 400 million cars are consumed, describe the mix of world production:

a. The US produces only cars, while Japan produces both cars and grain

b. The US produces both cars and grain, while Japan produces only cars

c. The US produces only grain, while Japan produces both cars and grain

d. The US produces only grain, while Japan produces only cars.

5.6 If 600 million cars are consumed, describe the mix of world production:

a. The US produces only cars, while Japan produces both cars and grain

b. The US produces both cars and grain, while Japan produces only cars

c. The US produces only grain, while Japan produces both cars and grain

d. The US produces only grain, while Japan produces only cars.

5.7 Specify a price at which both countries are willing to trade:

a. 3 tons of grain to 1 car

b. 1 ton of grain to 3 cars

c. 2 tons of grain to 1 car

d. 1 ton of grain to 2 cars

Answer 1

both in america and japan worker can produce 4 cars/yr,  

American worker can produce 10 tons of grain/yr, whereas a Japanese worker can produce 5 tons of grain/yr

America and japanese both has 100 million workers each

The opportunity cost is calculated below.

Since the oportnity cost of produing car is high in japan , japan will produce car mostly and since the opportunity cost for grain is high in america, they will mostly produce grains.

5.1) To produce 200 million cars we need 50 million workers as one worker can produce 4 cars so 50*4=200. So rest worker can be used to produce grains. that will be all the workers of Amerrica and the remainng 50 workers of japan.

so 100 *10 + 50* 5= 1250 million tons of grains (answer)

5.2) to consume 400 million of cars worldwide we need 100 million worker because each worker produces 4 cars. so, the remaning 100 million workers of america will produce grains that will be 100*10 = 1000 million tons grains.

5.3) To produce 600 milion cars we need 150 workers so that 150*4= 600 million cars can be produced. For this the 100 million workers of japan and 50 million workers of america is exhaused the remaing 50 million workers will produce grainsso the max they will produce is 50*10=500 million tons of grains.

5.4) option C. to produce 200 million cars we need 50 workers that is 50*4= 200 million cars. So remaing 50 million workers of japan will produce grains and the all the workers of america will produce grains.

5.5) option d) Since 400 million cars has to be produced we will need 100 million workers. so japan produces car and america produces grains.