Production Possibility Frontier Problem
Question 3
Australia and New Zealand are both highly regarded for their abilities to produce kiwis (K) and bauxite (B). The production possibility frontier for New Zealand is described by the equation
and the production possibilities frontier for Australia is given by the equation
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Draw the PPFs of both Australia and New Zealand below. They must be on the same graph. Label all intercepts.
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Does either country have an absolute advantage in the production of both goods? Explain.
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Which country has the comparative advantage in the production of kiwis? What about bauxite? How can you tell?
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