What is meant by complete specialization? By incomplete specialization? Why do both nations gains from trade in the first instance but only the small nations in the second?
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- What is meant by complete specialization? By incomplete specialization? Under the Ricardian model, why are both nations likely to gain from trade in the first instance but only the small nation in the second? (think in terms of the pre and post trade price ratios likely to prevail in each case)Under what conditions might the mainstream argument about the advantages of specialization based on comparative advantage break down?Suppose Big Country can produce 80 units of X by using all its resources to produce X or 60 units of Y by devoting all its resources to Y. Comparable figures for Small Nation are 60 units of X and 60 units of Y. Assuming constant costs, in which product should each nation specialize? Explain why. What are the limits of the terms of trade between these two countries? How would rising costs (rather than constant costs) affect the extent of specialization and trade between these two countries?
- Take two countries of two goods and set up your own numbers such that labor has absolute advantage in one country A or B. Then make a conclusion on how the trade will be beneficial for both countries.Which of the following statements is true about specialization and trade? Group of answer choices A country should specialize in and import the good for which it has absolute advantage. A country should specialize in and export the good for which it has absolute advantage. A country should specialize in and import the good for which it has comparative advantage. A country should specialize in and export the good for which they have comparative advantage.Q)5 a)Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization? Division of labor International trade Economies of scale b) In a market economy, ___ own(s) the means of production. individuals everyone the government or ruling class c)Which of the following is required for specialization to work? (Choose the best answer) Technology Education Trade solve this early
- Consider a two country, two goods, one factor (labor) model of international trade. Suppose home country require 1 units of labor to produce a unit of cloth and 1 unit of labor to produce a unit of wine (regardless of output levels). Foreign country requires 2 unit of labor to produce 1 unit of cloth and 1.5 units of labor to produce 1 unit of wine (regardless of output levels). (a) Which country has the comparative advantage in producing wine? Justify your answer. (b) Which country has the absolute advantage in producing wine? (c) Which country will have higher autarky price of wine in terms of cloth? (d) Suppose after trade, the international relative price settles at a level strictly between the autarky relative prices of the two countries. At the trade equilibrium, show which country will produce wine and which country will produce cloth.Finally, Canada and Australia are both English-speaking countries with not-too dissimilar population sizes. However, Canada’s trade is twice as large as that of Australia’s. to what extent, does comparative advantage help explain this?Q)5 a)Because of their relatively small national economies, which of the following is most likely considered to be the most important factor for Belgium, Korea, and Canada to take full advantage of specialization? Division of labor International trade Economies of scale b) In a market economy, ___ own(s) the means of production. individuals everyone the government or ruling class c)Which of the following is required for specialization to work? (Choose the best answer) Technology Education Trade solve all three subparts early.with short explanation and correctly
- The following table shows the output of rice and machinery one labor hour can produce in Mexico and Thailand: Rice Machinery Thailand 6 2 Mexico 2 1 a. What are the marginal products of labor in rice and machinery production in Thailand? What about Mexico? b. Which country has an absolute advantage in rice and which country has an absolute advantage in machinery? c. What is the autarkic price ratio of machinery relative to rice in each country? d. Which country has a comparative advantage in rice and which country has a comparative advantage in machinery? e. Suppose Mexico has 1,000 labor hours available. Construct the production-possibility frontier (PPF) and identify the optimal autarky equilibrium (using an indifference curve) for Mexico. f. Suppose the international price is set at 1 machinery:2.5 rice and Mexico decides to completely specialize in producing the product in which it has a comparative advantage. How would the above graph change? Use…Given the information as follows: Consider the following model of trade between Vietnam and France. Assume throughout that those two countries are the only two countries in the world, at least for purposes of trade. There are two goods: Rice and Beef. Consumers always spend 1/4 of their income on rice and the remainder on beef. The only factor of production is labor. Each Vietnamese worker can produce 2 unit of Rice or 1 unit of beef per unit of time, while each French worker can produce 1 units of rice or 3 units of beef per unit of time. There are 100 million workers in Vietnam and 70 million in France. a. Determine the product brings higher wealth to each country. b. Determine the pattern of trade for both countries using Ricardian model. Draw the world relative supply curve. c. What is the benefit of each country when joining international trade following Ricardian model? Draw the graph to clarify your idea.“Why are these theoretical concepts of absolute and comparative advantage important for countries as they embark on international trade?”
