Essentials of Economics
11th Edition
ISBN: 9781260520910
Author: SCHILLER, Bradley
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 1, Problem 6QFD
To determine
The reason behind North Korea not reducing military expenditure and putting more resources in food production. Also, ascertain the optimal mix of guns and butter.
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Why 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?
Suppose that an hour of work in Brazil can produce 1 pound of coffee or 4 pounds of sugar. In Colombia, an hour of work produces 2 pounds of coffee or 5 pounds of sugar.
Which country has the absolute advantage in coffee? In sugar?
Calculate the opportunity cost of each good in each country.
Which country has the comparative advantage in each good? Why?
What would be a mutually beneficial terms of trade?
What is the opportunity cost of one cake if we move from combination A to combination B?
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Similar questions
- In the past, comparative advantages have sometimes shifted from one nation to another. What factors do you think caused these shifts? Why? Was there anything a nation could have done to prevent an advantage from shifting to another nation?arrow_forwardAn economy is said to have a comparative advantage in the production of a good if it can: produce that good with more resources than another economy. produce that good with a higher opportunity cost than another economy. produce that good outside its production possibilities curve. produce the good at a lower opportunity cost than another economy.arrow_forwardSuppose that an hour of work in Germany can produce 5 pastries or 4 sausages. In Denmark, an hour of work produces 4 pastries or 3 sausages. Which country has the absolute advantage in pastries? In sausages? Calculate the opportunity cost of each good in each country. Which country has the comparative advantage in each good? Why? What would be a mutually beneficial terms of trade?arrow_forward
- What is Production Efficiency and Inefficiency in economics? Explain with the help of a diagram. When does a country have a comparative advantage over producing a good? Explain with examples.arrow_forwardWhen 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)?arrow_forwardAccording to the news wire what is the opportunity cost of a single missile test in terms of corn for each of north koreas 26 million peoplearrow_forward
- What is economics all about? What is supply and demand? What is exchanges rates?arrow_forwardIndicate 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_forwardIn the no specialization-no trade case, country X produces and consumes 60 units of good A and 10 units of good B. Country Y produces and consumes 20 units of good A and 20 units of good B. If the two countries specialize and trade, how many more units of good B will country X consume?arrow_forward
- Country 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_forwardHow might a consensus on economic goals impact the creation of economic policy? How might a lack of consensus on economic goals impact the creation of economic policy?arrow_forwardWhat is the opportunity cost of increasing the number of movies produced?arrow_forward
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