ECO
1. Suppose that an economy’s PPF can be drawn with manufactured goods (M) on the vertical axis and agricultural goods (A) on the horizontal axis. Using separate PPF
graphs, show the effects of the following historical events on the United States’ PPF. a. In 1959, Alaska and Hawaii gained statehood and became a part of the United
States. b. The Pemberton Mill was a large factory in Lawrence, Massachusetts, which collapsed without warning on January 10, 1860 in what is likely “the worst
industrial accident in Massachusetts history” and “one of the worst industrial calamities in American history”. c. Throughout the 1970s and 1980s, genetic engineering
increased crop yields in the United States. d. Hurricane Irene devastated farms and crops from North Carolina to Vermont. 2. Suppose that in the next 24 hours
Ontario and Vermont each produce two goods, maple syrup (M) and hockey sticks (H). It takes Ontario 6 hours to produce a gallon of maple syrup and 12 hours to produce
a hockey stick. It takes Vermont 2 hours to produce a gallon of maple syrup and 8 hours to produce a hockey stick. a. Which region has an absolute advantage in maple
syrup production? Which region has an absolute advantage in hockey stick production? b. Find the opportunity costs of each good for both Ontario and Vermont. c. Based
on comparative advantage, which good should be produced by Ontario? Vermont? d. If the rate of trade is 1 hockey stick for 3 gallons of maple syrup, does Ontario
benefit from the trade? What about Vermont? Use PPFs and CPFs to show that. Put Maple syrup on the horizontal axis and hockey sticks on the vertical axis. e. (BONUS
QUESTION) If the rate of trade is 1 hockey stick for 2 gallons of maple syrup, does Ontario benefit from the trade? What about Vermont? What if the rate of trade is 1
hockey stick for 4 gallons of maple syrup? Can you find the range for the rate of trade in which both Ontario and Vermont can benefit from the trade?
