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Business & Marketing
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Topic:

The Production Possibility Frontiers For Brazil And The United States

Essay Instructions:

Suppose that there are two products: clothing and soda. Both Brazil and the United States produce each product. Brazil can produce 100,000 units of clothing per year and 50,000 cans of soda. The United States can produce 65,000 units of clothing per year and 250,000 cans of soda. Assume that costs remain constant. For this example, assume that the production possibility frontier (PPF) is a straight line for each country because no other data points are available or provided. Include a PPF graph for each country in your paper. Chapter 5 of the Suranovic text is a good reference for this task.
Complete the following:
What would be the production possibility frontiers for Brazil and the United States?
Without trade, the United States produces AND CONSUMES 32,500 units of clothing and 125,000 cans of soda.
Without trade, Brazil produces AND CONSUMES 50,000 units of clothing and 25,000 cans of soda.
Denote these points on each COUNTRY's production possibility frontier.
Using what you have learned and any independent research you may conduct, which product should each country specialize in, and why?
To assist in your thinking and discussion, additional questions to consider include:
What is the labor-intensive good?
What is the Marginal Rate of Transformation impact?
What is the labor-abundant country?
What is the capital-abundant country?
Could trade help reduce poverty in Brazil and other developing countries?

Essay Sample Content Preview:

Economics
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What would be the production possibility frontiers for Brazil and the United States?
The essence of a production possibility frontier is simply to offer a clear analysis of the opportunity costs in the production processes of specified goods (Dalal, 2006).
Using what you have learned and any independent research you may conduct, which product should each country specialize in, and why?
When the distinct concepts of comparative and absolute advantage are brought forth in the analysis of the production processes involved herein, it is quite clear that these two nations have some strength in either of the two products. This is based mainly on the costs of production. Taking the case of the U.S. for example. Its total cost of production in relation to that of clothing is 32.5/125-0.26. In Brazil, the same goes for 50/25-2. From these production statistics, it is therefore evident that the U.S should place much of its focus on the production of soda. Brazil on the other hand, needs to focus more on the production of clothing. The advantages of specializing in the production of one good are that the nation will become self-sufficient within its boundaries.
What is the labor-intensive good?
Clothing is certainly the labor intensive good in this case. This is from the basic fact that the process of cloth production calls for the use of various kinds of labor at almost every stage. Manual labor has to be employed for this purpose, to ensure that the final product is obtained. Therefore, it constitutes a very labor intensive part of production. Soda on the other hand, is mainly manufactured using automated process, and purchased ingredients. As a result, it can be interpreted to be capital intensive.
What is the Marginal Rate of Transformation impact?
It is how much of a good can be sacrificed for the production of another. In quite some sense, it is closely related to the PPF. The calculation of marginal transformation rate for Brazil is given by:
(100000)/ (50000) = 2(two units for cloth.)
For the U.S.A.;
(65000)/ (250000) =0.26 clothing units.
Relating this to the initial discussion therefore, marginal transformatio...
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