Question 20 (Table) The table shows coffee and tea units produced for the United States and Japan. If Japan decides to increase production of tea from 20 units to 35 units, the opportunity cost s: United States Coffee 25 20 15 10 6 5 8 Tea 4 10 Japan 58 38 25 Coffee Tea 15 7 0 3 10 20 35 60 O A. 15 units of tea. B. 10 units of tea. C. 10 units of coffee. O D.8 units of coffee.

Question 20 (Table) The table shows coffee and tea units produced for the United States and Japan. If Japan decides to increase production of tea from 20 units to 35 units, the opportunity cost s: United States Coffee 25 20 15 10 6 5 8 Tea 4 10 Japan 58 38 25 Coffee Tea 15 7 0 3 10 20 35 60 O A. 15 units of tea. B. 10 units of tea. C. 10 units of coffee. O D.8 units of coffee.

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 19CTQ: Look at Exercise 33.2. Compute the opportunity costs of producing sweaters and wine in both France...

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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.
Look at Exercise 33.2. Compute the opportunity costs of producing sweaters and wine in both France and Tunisia. Who has the lowest opportunity cost of producing sweaters and who has the lowest opportunity cost of producing wine? Explain what it means to have a lower opportunity cost.
Is it possible to have a comparative advantage in the production of a good but not to have an absolute advantage? Explain.
What is comparative advantage?