Principles of Economics (Second Edition)
2nd Edition
ISBN: 9780393614077
Author: coppock, Lee; Mateer, Dirk
Publisher: W. W. Norton & Company
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Question
Chapter 1, Problem 4QFR
To determine
To evaluate:
The statement according to which trade is like football.
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This theory proposes that trade is a zero-sum game
Select one:
a.
The theory of Absolute Advantage
b.
The theory of Mercantilism
c.
The Factor Endowment Theory
d.
The Theory of Comparative Advantage
Draw the graphs and explain the factors that cause the movement along the demand curve and shifts of demand curve.
Compare and explain absolute and comparative advantage by giving examples.
Draw the graphs and explain the factors that cause the movement along the supply curve and shifts of supply curve.
When two nations trade with each other, complete specialization by both nations will occur ifa) Nations have increasing opportunity costs of production.b) The opportunity cost of producing goods is constant in both nations.c) One nation is large and the other one small.d) Conditions in answers b and c have to be met
Chapter 1 Solutions
Principles of Economics (Second Edition)
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- Indicate True (T) or False (F) for the following questions, and explain your answer in 50 words "If a certain trade is good for one person, it can’t be good for the other one."arrow_forwardUS and South Korea reached formal agreement on a plan to lift S. Korea’s long ban on US beef exports. What type of policy was S. Korea’s banning of US beef and why (other than fear of contaminated beef – mad cow disease) did S. Korea do this? Use offer-curve analysis to discuss the effects of this policy change. How does your answer change with your assumption as to whether S. Korea is a large or small country?arrow_forwardWhy is the theory of absolute advantage incapable of explaining trade in the real world? Explain.arrow_forward
- The New York Times (Nov. 30, 1993) reported that “the inability of OPEC to agree last week to cut production has sent the oil market into turmoil . . . [leading to] the lowest price for domestic crude oil since June 1990.” Statements True False The members of OPEC were trying to agree to cut production so they could save more oil for the future. OPEC was unable to agree on cutting production because each country has an incentive to cheat on any agreement. The newspaper also noted OPEC's view “that producing nations outside the organization, like Norway and Britain, should do their share and cut production.” What does the phrase “do their share” suggest about OPEC's desired relationship with Norway and Britain? OPEC would like Norway and Britain to act competitively. OPEC would like Norway and Britain to keep their production levels high. OPEC would like Norway and Britain to join the cartel.arrow_forwardTake 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.arrow_forwardCountry A specializes in producing kiwis. Country B specializes in producing oranges. As a result, Country A can consume more kiwis and oranges than it could have if it had tried to grow kiwis oranges itself and had decided not to trade. This illustrates the concept of: Group of answer choices The gains of trade Absolute advantage Supply & demand The value chainarrow_forward
- What is comparative advantage based on? A. dollar price B. labour costs C. opportunity costs D. capital costsarrow_forwardThe countries of Oceania and Eurasia are at war.5 As depicted in the figure, Oceania has four cities—Argula, Betra, Carnat, and Dussel—and it is concerned that one of them is to be bombed by Eurasia. The bombers could come from either base Alpha, which can reach the cities of Argula and Betra; or from base Beta, which can reach either Carnat or Dussel. Eurasia decides which one of these four cities to attack. Oceania doesn’t know which one has been selected, but does observe the base from which the bombers are flying. After making that observation, Oceania decides which one (and only one) of its four cities to evacuate. Assign a payoff of 2 to Oceania if it succeeds in evacuating the city that is to be bombed and a payoff of 1 otherwise. Assign Eurasia a payoff of 1 if the city it bombs was not evacuated and a zero payoff otherwise. Write down the extensive form game.arrow_forwardWhy is it important that the country or region with the lower opportunity cost produce the good? How would you use the concept of comparative advantage to argue for reducing restrictions on trade between countries?arrow_forward
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