3. Shifts in production possibilities Suppose Argentina produces two types of goods: agricultural goods and capital good. The following graph shows its current production possibilities frontier (PPF) for barley, an agricultural good, and industrial robots, a capital good. On the following graph, adjust the production possibilities frontier (PPF) to show the effects of an improvement in soil quality because of new fertilization techniques. Hint: Select either end of the curve on the graph to make the endpoints appear. Then drag one or both endpoints to the desired position. Points will snap into position, so if you try to move a point and it snaps back to its original position, just drag it a little farther. INDUSTRIAL ROBOTS (Thousands) 180 150 120 90 60 30 0 0 30 60 90 120 150 180 BARLEY (Millions of bushels) PPF
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Step 1: Understand the current PPF - The current PPF shows the maximum possible production of barley (in millions of bushels) and industrial robots (in thousands) that Argentina can produce with its current resources and technology. Show more…
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Consider two countries (Home and Foreign) that produce goods 1 (with labor and capi- tal) and 2 (with labor and land) according to the production functions described in problems 2 and $3 .$ Initially, both countries have the same supply of labor ( 100 units each), capital, and land. The capital stock in Home then grows. This change shifts out both the production curve for good 1 as a function of labor employed (described in problem 2 ) and the associated marginal product of labor curve (described in problem 3). Nothing happens to the production and marginal product curves for good 2 a. Show how the increase in the supply of capital for Home affects its production possibility frontier. b. On the same graph, draw the relative supply curve for both the Home and the Foreign economy. c. If those two economies open up to trade, what will be the pattern of trade (i.e., which country exports which good)? d. Describe how opening up to trade affects all three factors (labor, capital, land) in both countries.
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