Question

Figure 3-9 Uzbekistan's Production Possibilities Frontier Azerbaijan's Production Possbuitiles Fromtier 5 10 15 20 23 30 35 40 45 5r 5 10 15 2 25 3 3540 30 8. Refer to Figure 3-9 a) If Uzbekistan and Azerbaijian each divides its time equally between making bolts and making nails, then total production is bolts andnails b) Label these points on the graph for each country as point A e) If Uzbekistan and Azerbaijan switch from each country dividing its time equally between the production of bolts and nails to each country spending all of its time producing the good in which it has a comparative advantage, then total production will increase by bolts and d) Label these points on the graph for each country as point B e) In order for both countries to gain from trade one bolt must trade for between nails. and nails

Answer 1

8.

A.

Total production of bolts = 15+10 = 25

Total production of nails = 30+40 = 70

B.

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C.

For Ujbekistan, opportunity cost of bolts = 60/30 = 2 nails

For Azerbaizan,opportunity cost of bolts = 80/20 = 4 nails

Since Ujbekistan has lower opportunity cost in production of bolts, then this country has comparative advantage in production of bolts and Azerbaizan has the comparative advantage in production of nails.

So, total bolts produced = 30

Total nails produced = 80

Hence,

Total production increase in bolts = 30-25 = 5

Total production increase in nails = 80-70 = 10

D.

E.

Between 2 and 4 nails