Question

HASUEDAS SISSE
5. Worked Problem krugman et al. 2014, pp 449
Rare earths are important for the operation of lasers, cell phones, computer hard drives, and many of the
appliances we use daily. But they are also scattered about in small amounts, making them very difficult
and expensive to mine. China currently controls about 95% of the world's production of rare earths.
Meanwhile, the United States is the largest producer of chicken in the world. Fortunately, the United
States and China can trade with each other. But what if China refused to export rare earths, forcing the
United States to find ways to extract these rare earths on its own? What if China stopped importing
chicken and reverted to self-production?
Suppose that China and the United States can produce either chicken or rare earths - a hypothetical
example based on an actual trading pattern Assume that the production possibilities for rare earths and
chicken are as follows.
3.5. Production Poudflities
China Production Fondbilities
Quantity of
(thousands
tons
of too)
16
Quantityd hides bilans of
Quantity of chicken (bif pounde
Calculate the opportunity cost of rare earths and chicken for both countries. Does the United States have
a comparative advantage in producing rare earths? Suppose China wishes to consume 64 billion pounds
of chicken and 12 thousand tons of rare earths Show this point on a graph of the production possibilities.
Is this possible without trade?
<calculate the opportunity cost?​

Answer 1

Answer:

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Explanation:

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