Macroeconomics 11th Edition by Michael Parkin

Exercise 28

Gains from Trade
Use the following information to work Problem.
Before the Civil War, the South traded with the North and with England. The South sold cotton and bought manufactured goods and food. During the war, one of President Lincoln's first actions was to blockade the ports and prevent this trade. The South increased its production of munitions and food.
a. Draw a graph to illustrate production, consumption, and trade in the South before the Civil War.
b. Was the South consuming inside, on, or outside its PPFExplain your answer.
c. Draw a graph to show the effects of the Civil War on consumption and production in the South.
d. Did the Civil War change any opportunity costs in the SouthIf so, did the opportunity cost of everything increaseDid the opportunity cost of any items decreaseIllustrate your answer with appropriate graphs.