Assume Nebraska and Virginia each have 100 acres of farmland. The following table gives hypothetical figures for yield per acre in the two states:
Nebraska Virginia
Wheat 9 5
Corn 7 2
A)Who has the absolute advantage in the production of wheat?
Who has the absolute advantage in the production of corn?
Who has the comparative advantage in the production of wheat?
Who has the comparative advantage in the production of corn?
B) Suppose the two states decide that they want to produce 590 units of wheat together (not 590 units of wheat each). What is the maximum amount of corn that they could produce?
C) Draw the graph of the PPC for each state, and then draw the graph for the PPC of the two states combined. On each graph, put the quantity of wheat on the vertical axis, and the quantity of corn on the horizontal axis. Be sure to label your graph carefully to receive full credit!