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March 28, 2017

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The productivity of a single resource in producing wheat and microchips in both Canada and Japan: One unit of resource produces: Canada 50 tons wheat, 20 micrchips and Japan 2 tons wheat, 12 microchips. (b) Suppose Canada is endowed with 2 units of this all-purpose resource while Japan is endowed with 10 units. If the resource productivities reported above remain constant at all levels of output, plot the straight-line production possibilities frontier (PPF) for each country. (c) Using the theory of comparative advantage, which country will produce wheat? How about microchips? Justify your answer.

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