Macro 201 Homework # 4 Name: ________________________ Q

Macro 201 Homework # 4 Name: ________________________ Quiz I. Production Possibility Charts 1. _____ US Mexico 2. _____ pizza beer pizza beer 10 0 0 9 pizza 8 2 1 6 3 6 4 2 3 4 6 3 0 2 8 0 10 0 1. Draw a production possibilities curve for Mexico. 0 9 beer 2. Use the two above charts to answer the following questions. Assume no investment or other goods are produced or consumed. Assume relationships between pizza and beer are linear. a. What is the opportunity cost of pizza in terms of beer in the US? 1 pizza = 1 beer b. What is the opportunity cost of pizza in terms of beer in Mexico? 1 pizza = 3 beers c. If the US produced 6 pizzas how much beer could it produce? 4 beers d. Assume that pre-trading the US is producing 2 pizzas and 8 beers. Give an example of how trading with Mexico would make the US better off. US round pizza beer Trade 0 2 8 1 3 7 2 2 7 1 pizza made in US 3 2 7 3 beers made in Mex 4 2 10 II. Reading Economics for Life Lesson 61 might be helpful in your answers. A. Do economists generally believe international trade to be a good thing? Why? B. Why is it that special interest groups are able to protect themselves from foreign trade to the determent of everyone else? C. Give an example of a free trade restriction that benefits most people in an economy why does it benefit most people? Yes it increases the amount of stuff people get for the same amount of effort Special interest gains big personally while the benefits to individuals are diffuse Lots of possible infant industry pollution national defense etc
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