Questions: Sweden and Norway use equal quantities of resources to produce food and capital goods. The table below shows the maximum possible production of food OR capital goods for each country. Country Food Capital Goods Sweden 50 100 Norway 30 120 (a) Draw a correctly labeled graph of the production possibilities curve for Sweden. Place food on the horizontal axis and capital goods on the vertical axis. Plot the relevant numerical values on the graph. (b) On your graph in part (a), indicate the following. (i) A point that represents an efficient level of production, labeled E (ii) A point that represents an inefficient level of production, labeled. (iii) A point that represents an unattainable level of production, labeled U (c) Assume Sweden moves from producing 20 units of food and 60 units of capital goods to producing 30 units of food and 40 units of capital goods. What will happen to economic growth in Sweden in the future? (d) Which country has the comparative advantage in the production of capital goods? Explain. (e) Based on the table above, identify a specific number of units of capital goods that could be traded for 10 units of food and be mutually beneficial.

Sweden and Norway use equal quantities of resources to produce food and capital goods. The table below shows the maximum possible production of food OR capital goods for each country. Country Food Capital Goods Sweden 50 100 Norway 30 120 (a) Draw a correctly labeled graph of the production possibilities curve for Sweden. Place food on the horizontal axis and capital goods on the vertical axis. Plot the relevant numerical values on the graph. (b) On your graph in part (a), indicate the following. (i) A point that represents an efficient level of production, labeled E (ii) A point that represents an inefficient level of production, labeled. (iii) A point that represents an unattainable level of production, labeled U (c) Assume Sweden moves from producing 20 units of food and 60 units of capital goods to producing 30 units of food and 40 units of capital goods. What will happen to economic growth in Sweden in the future? (d) Which country has the comparative advantage in the production of capital goods? Explain. (e) Based on the table above, identify a specific number of units of capital goods that could be traded for 10 units of food and be mutually beneficial.
Transcript text: Sweden and Norway use equal quantities of resources to produce food and capital goods. The table below shows the maximum possible production of food OR capital goods for each country. \begin{tabular}{lcc} Country & Food & Capital Goods \\ Sweden & 50 & 100 \\ Norway & 30 & 120 \end{tabular} (a) Draw a correctly labeled graph of the production possibilities curve for Sweden. Place food on the horizontal axis and capital goods on the vertical axis. Plot the relevant numerical values on the graph. (b) On your graph in part (a), indicate the following. (i) A point that represents an efficient level of production, labeled E (ii) A point that represents an inefficient level of production, labeled। (iii) A point that represents an unattainable level of production, labeled $U$ (c) Assume Sweden moves from producing 20 units of food and 60 units of capital goods to producing 30 units of food and 40 units of capital goods. What will happen to economic growth in Sweden in the future? (d) Which country has the comparative advantage in the production of capital goods? Explain. (e) Based on the table above, identify a specific number of units of capital goods that could be traded for 10 units of food and be mutually beneficial.
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Solution

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Solution Steps

Step 1: Identify the maximum production points for Sweden

The maximum production points for Sweden are:

  • 50 units of food (horizontal axis)
  • 100 units of capital goods (vertical axis)
Step 2: Plot the production possibilities curve (PPC) for Sweden

The PPC is a straight line connecting the points (50, 0) and (0, 100).

Step 3: Indicate points E, I, and U on the graph
  • Point E (efficient level of production): Any point on the PPC, e.g., (25, 50)
  • Point I (inefficient level of production): Any point inside the PPC, e.g., (10, 20)
  • Point U (unattainable level of production): Any point outside the PPC, e.g., (60, 110)

Final Answer

The production possibilities curve for Sweden is a straight line connecting the points (50, 0) and (0, 100). Points E, I, and U are indicated as follows:

  • E: (25, 50)
  • I: (10, 20)
  • U: (60, 110)

{"axisType": 3, "coordSystem": {"xmin": -10, "xmax": 60, "ymin": -10, "ymax": 110}, "commands": ["y = -2x + 100"], "latex_expressions": ["$PPC: y = -2x + 100$", "$E: (25, 50)$", "$I: (10, 20)$", "$U: (60, 110)$"]}

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