Microeconomics (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134184241
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Question
Chapter 16, Problem 12RQ
(a)
To determine
Whether to agree or disagree with the given statements.
(b)
To determine
Whether to agree or disagree with the given statements.
(c)
To determine
Whether to agree or disagree with the given statements.
(d)
To determine
Whether to agree or disagree with the given statements.
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Many trading partners trade the same goods and services with one another. The U.S. exports automobiles to Europe and Europe exports automobiles to the United States. In fact, that's true for food, appliances, computers and many other goods. Does intra-industry trade contradict the theory of comparative advantage? Why or why not?
Two countries, Marland and Teckana, can produce either clothing or food using all their available resources at constant opportunity cost. The table below shows the daily production of clothing or food in Marland and Teckana.
Clothing
Food
Marland
120
20
Teckana
80
20
(a) Which country has the absolute advantage in producing food? Explain.
(b) Which country has the comparative advantage in producing food? Explain.
(c) Assume the two countries specialize based on their comparative advantage. If the two countries engage in trade and one unit of food is exchanged for 5 units of clothing, will these terms of trade be mutually beneficial? Explain.
(d) Suppose Teckana invented new equipment to only increase the production of clothing.
(i) Draw a correctly labeled graph of Teckana’s initial production possibilities curve, with clothing on the horizontal axis and food on the vertical axis. Plot the numerical values above on the graph.
(ii) Show the effect of the new…
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 chain
Chapter 16 Solutions
Microeconomics (9th Edition) (Pearson Series in Economics)
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Similar questions
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