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(Solved): 2. The output per labourer per day in the production of sugar and tobacco for Belize and Bonaire a ...



2. The output per labourer per day in the production of sugar and tobacco for Belize and Bonaire are given in the table below

2. The output per labourer per day in the production of sugar and tobacco for Belize and Bonaire are given in the table below. a) What is the opportunity cost of producing Tobacco in Belize? b) What is the opportunity cost of producing Tobacco in Bonaire? c) Assume that Belize has 500 labour days available for producing Sugar and/or Tobacco, and that Bonaire has 900 labour days available. Putting Sugar on the vertical axis, draw the straight-line production possibility frontiers for both Belize and Bonaire. d) What is the slope of Relize's production possibility frontier, and what is the slope of Bonaire's production possibility frontier? e) How is the slope of a production possibility frontier related to the opportunity cost of the good on the horizontal axis? f) What does a straight-line production possibility frontier imply? g) Which country will specialize in and export Tobacco? h) What is a possible terms of trade at which both nations will be willing to trade? i) Plot a terms of trade line at which both nations will be willing to trade on your production possibility frontiers of part (c), starting the terms of trade line from a point of complete specialization for each nation.


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Terms of trade: It is the rate at which goods and services are exchanged from one country to another. It is the terms in which one count
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