8. According to the graph below, suppose there are two economies Switzerland and Thailand. Both produce watches. The average cost curve for Switzerland is ACS#Iss, the average cost curve for Thailand is ACTHAL DWORLD is the world demand for watches, DTHAI is the domestic demand of Thailand. The equilibrium point of world market is at point 1, the equilibrium price is P, Thailand imports watches from Switzerland. Based on the above information, answer the following questions: Price, cost (per watch) Co P₁ P₂ ACgwiss ACTHA DTH WORLD Quantity of watches produced and demanded (a) Which country has a comparative advantage in watch production? (b) What are the reasons for the watch trade between Thailand and Switzerland? (c) Can the two countries gain from the current watch trade?

8. According to the graph below, suppose there are two economies Switzerland and Thailand. Both produce watches. The average cost curve for Switzerland is ACS#Iss, the average cost curve for Thailand is ACTHAL DWORLD is the world demand for watches, DTHAI is the domestic demand of Thailand. The equilibrium point of world market is at point 1, the equilibrium price is P, Thailand imports watches from Switzerland. Based on the above information, answer the following questions: Price, cost (per watch) Co P₁ P₂ ACgwiss ACTHA DTH WORLD Quantity of watches produced and demanded (a) Which country has a comparative advantage in watch production? (b) What are the reasons for the watch trade between Thailand and Switzerland? (c) Can the two countries gain from the current watch trade?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter9: Application: International Trade

Section: Chapter Questions

Problem 2PA

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