3. Consider the following table that presents the labour requirements for production in the East and West (labour hours per unit of output) Clothing 20 Food East 10 West 5 15 Answer the following questions. a. Does the East have an absolute advantage in clothing production? Does the West have an absolute advantage in clothing production? Does the East have an absolute advantage in food production? Does the West have an absolute advantage in clothing production? Explain. b. Does the East have a comparative advantage in clothing production? Does the West have a comparative advantage in clothing production? Does the East have a comparative advantage in food production? Does the West have a comparative advantage in clothing production? Explain. c. In the West, what is the opportunity cost of producing one more unit of food? In the East, what is the opportunity cost of producing one more unit of food? Explain.

3. Consider the following table that presents the labour requirements for production in the East and West (labour hours per unit of output) Clothing 20 Food East 10 West 5 15 Answer the following questions. a. Does the East have an absolute advantage in clothing production? Does the West have an absolute advantage in clothing production? Does the East have an absolute advantage in food production? Does the West have an absolute advantage in clothing production? Explain. b. Does the East have a comparative advantage in clothing production? Does the West have a comparative advantage in clothing production? Does the East have a comparative advantage in food production? Does the West have a comparative advantage in clothing production? Explain. c. In the West, what is the opportunity cost of producing one more unit of food? In the East, what is the opportunity cost of producing one more unit of food? Explain.

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Description: 3. Consider the following table that presents the labour requirements for production in theEast and West (labour hours per unit of output)FoodClothing20East10West515Answer the following questions.a. Does the East have an absolute advantage in clothi

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter33: International Trade

Section: Chapter Questions

Problem 30P: In Japan, one worker can make 5 tons of rubber or 80 radios. In Malaysia, one worker can make 10...

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In Japan, one worker can make 5 tons of rubber or 80 radios. In Malaysia, one worker can make 10 tons of rubber or 40 radios. Who has the absolute advantage in the production of rubber or radios? How can you tell? Calculate the opportunity cost of producing 80 additional radios in Japan and in Malaysia. (Your calculation may involve fractions, which is fine,) Which country has a comparative advantage in the production of radios? Calculate the opportunity cost of producing 10 additional tons of rubber in Japan and in Malaysia. Which country has a comparative advantage in producing rubber? In this example, does each country have an absolute advantage and a comparative advantage in the same good? In what product should Japan specialize? In what product should Malaysia specialize?
True or False: The source of comparative advantage must be natural elements like climate and mineral deposits. Explain.
Brazil can produce 100 pounds of beef or 10 autos. In contrast the United States can produce 40 pounds of beef or 30 autos. Which country has the absolute advantage in beef? Which country has the absolute advantage in producing autos? What is the opportunity cost of producing one pound of beef In Brazil? What is the opportunity cost of producing one pound of beef in the United States?
How do trade barriers affect the average Income level in an economy?
How does comparative advantage lead to gains from trade?
Trade has income distribution effects. For example, suppose that because of a government-negotiated reduction in trade barriers, trade between Germany and the Czech Republic increases. Germany sells house paint to the Czech Republic. The Czech Republic sells alarm clocks to Germany. Would you expect this pattern of trade to increase or decrease jobs and wages in the paint industry in Germany? The alarm clock industry in Germany? The paint industry in Czech Republic? The alarm clock industry in Czech Republic? What has to happen for there to be no increase in total unemployment in both countries?
Does intra-industry trade contradict the theory of comparative advantage?
France and Tunisia both have Mediterranean climates that are excellent for producing/harvesting green beans and tomatoes. In France it takes two hours for each worker to harvest green beans and two hours to harvest a tomato. Tunisian workers need only one hour to harvest the tomatoes but four hours to harvest green beans. Assume there are only two workers, one in each country, and each works 40 hours a week. Draw a production possibilities frontier for each country. Hint: Remember the production possibility frontier is the maximum that all workers can produce at a unit of time which, in this problem, is a week. Identify which country has the absolute advantage in green beans and which country has the absolute advantage in tomatoes. Identity which country has the comparative advantage. How much would France have to give up In terms of tomatoes to gain from trade? How much would it have to give up in terms of green beans?
Table 33.15 shows how the average costs of production for semiconductors (the chips In computer memories) change as the quantity of semiconductors built at that factory increases. Based on these data, sketch a curve with quantity produced on the horizontal axis and average cost of production on the vertical axis. How does the curve illustrate economies of scale? If the equilibrium quantity of semiconductors demanded is 90,000, can this economy take full advantage of economies of scale? What about if quantity demanded is 70,000 semiconductors? 50,000 semiconductors? 30,000 semiconductors? Explain how international trade could make it possible for even a small economy to take full advantage of economies of scale, while also benefiting from competition and the variety offered by several producers.
Under what conditions does comparative advantage lead to gains from trade?
Why might intra-industry trade seem surprising from the point of view of comparative advantage?
If opening up to free trade would benefit a nation, then why do nations not just eliminate their trade barriers, and not bother with international trade negotiations?