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What would be the production possibility frontiers for Brazil and the United States in...

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littlemay | Student, Undergraduate | eNoter

Posted November 25, 2011 at 5:39 PM via web

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What would be the production possibility frontiers for Brazil and the United States in this scenario?

 

There are two products: clothing and soda. Both Brazil and the United States produce each product. Brazil produces 100,000 units of clothing per year and 50,000 cans of soda. The United States produces 65,000 units of clothing per year and 250,000 and cans of soda. Assume that costs remain constant.

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted November 25, 2011 at 10:49 PM (Answer #1)

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The data given here is not sufficient to create a PPF for each country.  This is because we only have one data point for each country and we need at least two data points in order to create a PPF.

One thing a PPF shows is opportunity cost.  It shows us how many (in this example) cans of soda the US would have to give up in order to produce an extra unit of clothing.  With the data given here, we only know about one possibility for each country.  We do not know how many, for example, cans of soda either country could produce if it produced no clothing whatsoever.

In order to create a PPF for either country (or for both combined) we would need to have at least one more data point for each country.

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