Question

LLLSLUI The hypothetical figures in Table 2.9 give five alternate combinations of steel and autos that lapan and South Korea can produce if they fully use all factors of production at their disposal with the best technology available to them. TABLE 2.9 Stool and Auto Production JAPAN SOUTH KOREA Steel (tons) Autos Steel (tons) Autos 520 1200 0 500 350 1100 600 1300 1430 810 600 900 o mgage learning 200 800 a) Sketch the production possibilities schedules of Japan and South Korea. Locate steel on the vertical axis and autos on the horizontal axis of each nation's graph. The production possibilities schedules of the two countries appear bowed out, from the origin. Why? b) In autarky, Japan's production and consumption points along its production possibilities schedule are assumed to be 500 tons of steel and 600 autos. Draw a line tangent to Japan's autarky point and from it calculate Japan'sMRT of steel into autos. In autarky, South Korea's production and consumption points along its production possibilities schedule are assumed to be 200 tons of steel and 800 autos. Draw a line tangent to South Korea's autarky point and from it calculate South Korea's MRT of steel into autos.

Answer 1

MRT is the movement along PPF MRT = change in good & change in goody MRT = -20 -0.0333 Steel (tons) 600 1400 Ile 200 400 600 800 1000 1200 1400 rutos Japan's PPR ro steel (tons) 10:7 -400 MOTO - = -2.67 ISO 200 400 600 800 lovo 1200 1400 Autos South Koreas PPF

a) the production possibility frontier of both the country is bowed out because of the law of increasing opportunity costs

b)Japan's MRT of steel into autos in autarky at point C is -0.033
South Korea's MRT of steel into autos in autarky at point D is -2.67
Negative MRT shows downward sloping curve