QUESTION 16 Free trade restricts a nation's ability to specialize in specific commodities that may allow for more efficient use of resources. O True O False QUESTION 17 Large countries tend to be more than small countries. O True O False QUESTION 18 The community indifference curve represents the tastes of demand preferences in a nation or region. True False

QUESTION 16 Free trade restricts a nation's ability to specialize in specific commodities that may allow for more efficient use of resources. O True O False QUESTION 17 Large countries tend to be more than small countries. O True O False QUESTION 18 The community indifference curve represents the tastes of demand preferences in a nation or region. True False

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter18: International Trade And Comparative Advantage

Section: Chapter Questions

Problem 2TY

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Are the following statemen ts true or false? Explain ineach case.a. ''1Wo countries can achieve gains from trade evenif one of the countries has an absolute advantagein the production of all goods."b. "Certain talented people have a comparativeadvantage in everything they do."c. ''U a certain trade is good for one person, it can'tbe good for the other one.''d. ''U a certain trade is good for one person, it isa lways good for the other o ne.''c . "U trade is good for a country, it must be goodfor everyone in the country.''
Givenw: (1) two nations (1 and 2) which have the sametechnology but different factor endowments and tastes, (2)two commodities (X and Y) produced under increasingcosts conditions and (3) no transportation costs, tariffs orother obstructions to trade.Prove geometrically that mutually advantageous tradebetween the two nations is possible.Note: Your answer should show the autarky (no-trade) andfree-trade points of production and consumption for eachnation, show gains from trade of each nation and expressthe equilibrium condition that should prevail when trade Stop equilibrum
Are the following statements true or false? Explain ineach case.a. “Two countries can achieve gains from trade evenif one of the countries has an absolute advantagein the production of all goods.”b. “Certain talented people have a comparativeadvantage in everything they do.”c. “If a certain trade is good for one person, it can’tbe good for the other one.”d. “If a certain trade is good for one person, it isalways good for the other one.”e. “If trade is good for a country, it must be good foreveryone in the country
1.Under what conditions is the production possi bilities frontier linear rather than bowed out? 2.Explain how absolute advantage and compara-tive advantage differ. 3.Give an example in which one person has anabsolute advantage in doing something butanother person has a comparative advantage. 4.Is basoute advantage or comparative advantage more important for trade? Explain yourreasoning using the example in your answer toQuestion 3..If two parties trade based on comparativeavantage an ot gain, in wat range mustthe price of the trade lie?.Will a nation tend to export or import goods forwhich it has a comparative advantage?
9. Answer ALL parts of this question. Consider the standard trade model with two goods and two factors, labour and capital. (a) Suppose that a country experiences an increase in its labour force. Assume thatgood X is labour intensive and good Y is capital intensive. How would theproduction possibility frontier change as a result? Illustrate this with a simplediagram. (b) What does it mean for the “terms of trade” to improve and why might this matter interms of welfare? (c) Consider two countries: Home and Foreign. Each country produces two goods,cloth (C) and food (F). Assume Home is an exporter of cloth. Now suppose Homeimposes a 20 percent tariff on the value of food imports. What will be the effect ofthe food tariff on the relative price of cloth and terms of trade? Illustrate youranswer with a relevant diagram. You may assume that Home is large enough toaffect the world market.
Suppose that in a year an American worker canproduce 100 shirts or 20 computers and a Chineseworker can produce 100 shirts or 10 computers.a. For each country, graph the productionpossibilities frontier. Suppose that without tradethe workers in each country spend half their timeproducing each good. Identify this point in yourgraphs.b. If these countries were open to trade, whichcountry would export shirts? Give a specificnumerical example and show it on your graphs.Which country would benefit from trade?Explain.c. Explain at what price of computers (in terms ofshirts) the two countries might trade.d. Suppose that China catches up with Americanproductivity so that a Chinese worker canproduce 100 shirts or 20 computers in a year. Whatpattern of trade would you predict now? Howdoes this advance in Chinese productivity affectthe economic well-being of the two countries’citizens?
I need help understanding how to solve for this question Worker Wage Time to complete 1 unit Paneling Dry Wall Al ($9/hr) 6hrs 4hrs Ken ($10/hr) 5hrs 5hrs Assuming there are 10 walls to panel (10 paneling jobs) and 8 dry walls to build (8 dry wall jobs) what is the monetary savings if Ken and Al specialize in their respective comparative advantages?
. Which country has an absolute advantage in the production of fruit? Which countryhas an absolute advantage in the production of timber?b. Which country has a comparative advantage in the production of fruit? of timber?c. Sketch the PPF’s for both countries.d. Assuming no trading between the two, if both countries wanted to have equalnumbers of feet of timber and baskets of fruit, how would they allocate workers tothe two sectors?e. Show that specialization and trade can move both countries beyond their PPF’s.
The idea that an action should be undertaken if and only if the benefits exceed the costs is known as the concept of Oeconomic efficiency. O public welfare maximization. marginal comparative advantage. O monetary construction of values.
Suppose that the opportunity cost ratio for apples and oranges is 1AE =30 in Germany but 10= 2A in Japan At which of the following international eschange ratios (terms of trade) with Gemany andJapan be willing to specialize and engage in trade with each otherO10=215AO 10= 1.25AO 10=0.25AO 10=0.15A
Consider two countries (Spain and Romania), two goods (textiles and cars), and two factors of production (skilled and unskilled labor). Romania is relatively abundant in unskilled labor, and textiles are relatively intensive in the use of unskilled labor. Both countries use the same technologies. (a) Which groups will be in favor of free trade in both countries? (b) What will happen to income distribution in Spain and Romania after free trade? (c) HowdoesfreetradeaffecttheincentivesofSpanishworkerstoacquireskills? (d) Assuming such high tariffs that goods are non-tradable, which group will be in favor of free migration? (e) Do you consider allowing labor mobility as a close substitute to free trade?
The United States exports corn and aircraft tothe rest of the world, and it imports oil andclothing from the rest of the world. Do youthink this pattern of trade is consistent with theprinciple of comparative advantage? Why orwhy not?