The U.S. imports lumber among other goods from Canada. The lumber has been the topic of political dialogue between the 2 countries in the past few days. So let’s take X as ‘lumber’ and Y as ‘other goods’. 

Suppose the Canadian lumber and other exportable goods are produced with the following production Possibilities frontier (PPF): X2 + Y2 = 900 

Suppose the U.S. utility function for the Canadian lumber, X, and other exportable goods, Y, is: U = X Y 

a. Derive the conditions necessary to determine the ‘Optimal Product Mix’ discussed in chapter 10. 

b. Draw the PPF (partial just the first quadrant) with Y on the vertical axis. On the same graph, draw at least one indifference curve so as to show the “optimal product mix’. Can this graph represent the ‘pure exchange’ economy? Explain why or why not. 

c. Now draw in a price line that can make the ‘optimal product mix’ a competitive exchange equilibrium. Can multiple prices satisfy the requirement? Explain why or why not possible to find one set of prices. In what sense is this price line similar to budget constraint (or budget line)? 

d. On the basis of the work you have done so far, explain whether or not there is room for re-negotiation in terms of prices. 

e. Can Canada accept any prices the U.S. can come up with? In other words, describe the limitations (production, resource etc.) that may hinder the negotiation from the production side. 

f. In what sense does the graph you drew represent ‘general equilibrium’? Did you use an Edgeworth box? Explain why or why not.

Suppose we are analyzing the market for oranges in 2017. Graphically illustrate the impact of each of the following events would have on supply and demand curves. Also show how equilibrium price and quantity would change in each scenario. See instruction video, “Week 2_Homework Guideline.ppsm”. Make sure you provide narrative discussions on each scenario to receive full credits

A. In 2017, Wildfires destroyed a majority of orange farms, reducing orange production substantially (minimum words requirement: 100 words)

B. The price of apple, orange substitute, decreased in 2017.

(minimum words requirement: 100 words)

C. The price of orange in 2018 is expected to rise dramatically compared to 2017

(minimum words requirement: 100 words)

D. The United States Census Bureau reported that household income dramatically increased in 2017

(minimum words requirement: 100 words)

Note that you must submit everything (discussions and graphical analysis) in one word or pdf document, otherwise, I will return your assignment. Separate files or documents will not be accepted.