Suppose Italy has the comparative advantage in producing wine and Germany has the comparative advantage in producing machine tools. Suppose further that each country produces both goods when operating in autarky. When the countries move from autarky to mutually beneficial trade, profits in the German machine tool industry will everything else held constant. Select one: O A. decrease O B. be ambiguous O C. remain unchanged O D. increase

Suppose Italy has the comparative advantage in producing wine and Germany has the comparative advantage in producing machine tools. Suppose further that each country produces both goods when operating in autarky. When the countries move from autarky to mutually beneficial trade, profits in the German machine tool industry will everything else held constant. Select one: O A. decrease O B. be ambiguous O C. remain unchanged O D. increase

Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781305971509

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter9: Application: International Trade

Section: Chapter Questions

Problem 1CQQ

See similar textbooks

Similar questions

True or False: The source of comparative advantage must be natural elements like climate and mineral deposits. Explain.
a) Suppose the two countries engage in international trade, and that the international relativeprice of good (T) is 3 tons of good (D). Can there be mutually beneficial international tradebetween the two countries? If so, which are the patterns of comparative advantage, ofproduction and consumption, of exports and imports between the two countries? What arethe gains from trade for each country? b)
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
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?
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
a. Differentiate absolute advantage from comparative advantage. Explain how a country should specialize given analysis of their comparative advantage b.When countries specialize based on their comparative advantage and trade with each other, how does it lead to gains from trade for both countries (even if one country has an absolute advantage in both goods)?
Suppose that Poland and Wales both produce ale and glass. Poland's opportunity cost of producing a pane of glass is 4 kegs of ale while Wales's opportunity cost of producing a pane of glass is 12 kegs of ale. By comparing the opportunity cost of producing glass in the two countries, you can tell thatWales has a comparative advantage in the production of glass andPoland has a comparative advantage in the production of ale. Suppose that Poland and Wales consider trading glass and ale with each other. Poland can gain from specialization and trade as long as it receives more than of ale for each pane of glass it exports to Wales. Similarly, Wales can gain from trade as long as it receives more than of glass for each keg of ale it exports to Poland. Based on your answer to the last question, which of the following prices of trade (that is, price of glass in terms of ale) would allow both Wales and Poland to gain from trade? Check all that apply. 8 kegs of…
2. In the USA 1 unit of labor can produce 50 cars while in Canada 1 unit of labor can produce5 cars. The total amount of labor in each country is L = 100. Which one of these statements iscorrect?A. Canada has comparative advantage on the production of cars.B. The USA has comparative advantage on the production of cars.C. Since their production possibility frontiers are the similar neither country has comparativeadvantage on the production of cars.D. Not enough information to answer this question.
i live in turkey a) What are the comparative advantages (as a product or service) of your country? Why? b)Are those products main export goods/services of your country? i) If yes, please give the percent of export share of those products. ii) If no, please indicate which products/services should beconsidered as products that they have comparative advantage considering the current export volume?
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
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.''