Imagine that you work for the World Bank and you have been called to Ghana to aid the new president to come up with a new international trade strategy.You are told that the new government is interested in moving away from agriculture and into manufacturing. To do so, the government wants to pursuit a policy of import substitution industrialisation (ISI).You are given a brief about Ghana highlighting the following points:About half of Ghana’s population depends on agriculture, but Ghana still imports some of its food.The majority of Ghana's people live in rural areas and exist on a subsistence way of life.Ghana has one of the highest rates of income inequality in the world.Nearly half of the population is employed in agriculture. QUESTION B.1 Why would Ghana trade with a country that is very similar to it? Will trade between Ghana and an almost identical neighbour be governed by comparative advantage?

Below are the important points that are given in question. *Most of the population is agriculture…

Answered: Imagine that you work for the World…

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter19: International Trade

Section: Chapter Questions

Problem 3QFR

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Imagine that you work for the World Bank and you have been called to Ghana to aid the new president to come up with a new international trade strategy.

You are told that the new government is interested in moving away from agriculture and into manufacturing. To do so, the government wants to pursuit a policy of import substitution industrialisation (ISI).

You are given a brief about Ghana highlighting the following points:

About half of Ghana’s population depends on agriculture, but Ghana still imports some of its food.
The majority of Ghana's people live in rural areas and exist on a subsistence way of life.
Ghana has one of the highest rates of income inequality in the world.
Nearly half of the population is employed in agriculture.

QUESTION B.1

Why would Ghana trade with a country that is very similar to it? Will trade between Ghana and an almost identical neighbour be governed by comparative advantage?

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

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