Question

Please answer the problem bellow:

Visualizing the factor-endowment theory

Consider the two hypothetical nations of Greenburg and Ferville. Suppose they both produce only two goods, robot vacuum cleaners and pogo sticks. Each country faces a trade-off when producing the two goods. The following graph displays the respective production possibilities frontiers (PPF) for Greenburg and Ferville.

Greenburg's PPF Terms of Trade POGO STICKS (Thousands) Ferville's PPF Xo 0 5 45 50 10 15 20 25 30 35 40 ROBOT VACUUM CLEANERS (Thousands)

Answer 1

Q1) option 1 & 3)

Point A & C , lie inside PPF , hence attainanable

Graph

Greenburg's PPF Terms of Trade * POGO STICKS (Thousands) Ferville's PPF Xo X4 0 5 45 50 10 15 20 25 30 35 40 ROBOT VACUUM CLEANERS (Thousands)

Q2) option 1 & 3)

Point W lie on TOT line

& Point Y lie below TOT

While X was attainanable earlier by both

While Z lies to right of TOT, not attainanable

.

Fill up : export

As W is desirable point, as both nations have same post trade consumption bundle

So F will export Robot

As W lie to right of point, where TOT is tangent to PPF of F