Below are the production possibility frontiers for Costa Rica and Guatemala Costa Rica Guatemale Pineapples (tons) Pineapples (lons) J0 Coconuts (tons) go Сосonuts 90 (tons) A. Which country, if any, has absolute advantage in producing pineapples? Why? B. Which country, if any, has comparative advantage in producing coconuts? Why? C. Before the trade, Costa Rica made and consumed 40 tons of pineapple and 90 tons of coconuts, while Guatemala produces and consumes 45 tons of pineapple and 90 tons of coconuts. How many more additional tons of each good is produced after the counties started to trade? Show your solution.

Below are the production possibility frontiers for Costa Rica and Guatemala Costa Rica Guatemale Pineapples (tons) Pineapples (lons) J0 Coconuts (tons) go Сосonuts 90 (tons) A. Which country, if any, has absolute advantage in producing pineapples? Why? B. Which country, if any, has comparative advantage in producing coconuts? Why? C. Before the trade, Costa Rica made and consumed 40 tons of pineapple and 90 tons of coconuts, while Guatemala produces and consumes 45 tons of pineapple and 90 tons of coconuts. How many more additional tons of each good is produced after the counties started to trade? Show your solution.

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 2SCQ: Brazil can produce 100 pounds of beef or 10 autos. In contrast the United States can produce 40...

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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?
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?
Review the numbers for Canada and Venezuela from Table 33.12 which describes how many barrels of oil and tons of lumber the workers can produce. Use these numbers to answer the rest of this question. Draw a production possibilities frontier for each country. Assume there are 100 workers in each country. Canadians and Venezuelans desire both oil and lumber. Canadians want at least 2,000 tons of lumber. Mark a point on their production possibilities where they can get at least 3,000 tons. Assume that the Canadians specialize completely because they figured out they have a comparative advantage in lumber. They are willing to give up 1,000 tons of lumber. How much oil should they ask for in return for this lumber to be as well off as they were with no trade? How much should they ask for if they want to gain from trading with Venezuela? Note: We can think of this ask as the relative price or trade price of lumber. Is the Canadian ask you identified in (b) also beneficial for Venezuelans? Use the production possibilities frontier graph for Venezuela to show that Venezuelans can gain from trade.
True or False: The source of comparative advantage must be natural elements like climate and mineral deposits. Explain.
Is it possible to have a comparative advantage in the production of a good but not to have an absolute advantage? Explain.
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.