The table below shows how many T-shirts or jeans can be made daily by one worker in Aquarius and Capricorn.T-ShirtsJeansAquariusCapricorn402.is more efficient at producing T-shirts and Aquariusis more efficient at producing jeans. Enter your responses fora. Aquariusopportunity costs and terms of trade, below, rounded to 2 decimal placesb. In Aquarius the opportunity cost of 1 pair of jeans is10 T-shirts and the opportunity cost of 1 T-shirt is01 jeans.In Capricorn the opportunity cost of 1 pair of jeans is20 T-shirts and the opportunity cosf of 1 T-shirt is 005 jeans.c On the basis of comparative advantage (Click to select) v should specialize in the production of T-shirts and (Click to select) v shouldspecialize in the production of jeans.d. The terms of trade must be somewhere between 1 pair of jeans traded for20 T-shirts in Capricorn.10 T-shirts in Aquarius and 1 pair of jeans traded fore. Suppose there are 200,000 workers in Aquarius and 300,000 workers in Capricorn, and before trade, half of each country's labourforce makes each good. As a result of specialization and trade there is a gain in the two countries' output of both products withmore T-shirts andmore jeans.

The correct answer is given in the second step.

Answered: The table below shows how many T-shirts…

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter3: Interdependence And The Gains From Trade

Section: Chapter Questions

Problem 3PA

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In Germany it takes three workers to make one television and four workers to make one video camera. In Poland It takes six workers to make one television and 12 workers to make one video camera. Who has the absolute advantage in the production of televisions? Who has the absolute advantage in the production of video cameras? How can you tell? Calculate the opportunity cost of producing one additional television set in Germany and In Poland. (Your calculation may involve fractions, which Is tine.) Which country has a comparative advantage in the production of televisions? Calculate the opportunity cost of producing one video camera in Germany and in Poland. Which country has a comparative advantage in the production of video cameras? In this example, is absolute advantage the same as comparative advantage, or not? In what product should Germany specialize? In what product should Poland specialize?
France and Tunisia both have Mediterranean climates that are excellent for producing/harvesting green beans and tomatoes. In France it takes two hours for each worker to harvest green beans and two hours to harvest a tomato. Tunisian workers need only one hour to harvest the tomatoes but four hours to harvest green beans. Assume there are only two workers, one in each country, and each works 40 hours a week. Draw a production possibilities frontier for each country. Hint: Remember the production possibility frontier is the maximum that all workers can produce at a unit of time which, in this problem, is a week. Identify which country has the absolute advantage in green beans and which country has the absolute advantage in tomatoes. Identity which country has the comparative advantage. How much would France have to give up In terms of tomatoes to gain from trade? How much would it have to give up in terms of green beans?
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.

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