PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 16, Problem 4P
(a)
To determine
Illustrate the
(b)
To determine
Describe the consumption possibilities for Costa Rica in the case of open economy.
(c)
To determine
Explain the answer based on the assumption that 1 computer traded for 200 pounds of coffee on world markets.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
In 2017, Ecuador's biggest export was crude (unprocessed) petroleum, 63% of which it exported to the United States, and
Ecuador's biggest import was refined (processed) petroleum, of which 70% was imported from the United States. What does
this tell you about the countries' comparative advantages in extracting petroleum and refining petroleum?
This information suggests that
has a comparative advantage in refining petroleum, and
the United States
must I
ntage in extracting petroleum.
Ecuador
Suppose that in the country of England, two goods can be produced on available agricultural land: wine and wool. Suppose that the opportunity costs of production are constant, so that the PPF is a straight line. Further, when all resources are devoted to wine production, England can produce 200 (thousand) barrels. When all resources are devoted to wool production, England can produce 400 (thousand) bushels of wool.
Suppose that a bushel of wool could be traded for a barrel of wine, one-for-one, on the international market. Draw a diagram illustrating the original situation, and this new situation, with wool on the X-axis and wine on the Y-axis.
With its given resources, Nicaragua can produce either 20 thousand pounds of chicken or 80 thousand pounds of quinoa per year. Costa Rica can produce either 100
thousand pounds of chicken or 200 thousand pounds of quinoa per year.
Suppose the countries completely specialize and they decide to trade 14 thousand pounds of chicken for 42 thousand pounds of quinoa.
After trade, Nicaragua will consume
thousand pounds of chicken and
thousand pounds of quinoa.
After trade, Costa Rica will consume
thousand pournds of chicken and
thousand pounds of quinoa.
Round to the nearest whole number.
Chapter 16 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
Knowledge Booster
Similar questions
- Q2. Suppose that there are two countries (A and B) and two goods (a labor-intensive good X, textile, and a capital-intensive good Y, electronics). The two countries have identical demand for the two goods but different labor and capital endowments. Suppose (Px/Py)A < (Px/Py)B in autarky. Identify the capital-abundant country and the labor-abundant country, respectively. Use a PPF-indifference-curve graph to identify the autarky equilibrium for country B. In the same graph, show country B's gains from trade when the two countries trade at a level of Px/Py that is between the two countries' autarky price ratios. In the above graph, identify the trade triangle (including export and import quantities) for country B. What would be the effect of trade on country B's relative nominal wage rate, i.e., the ratio of nominal wage rate relative to nominal capital rental rate (w/r)? Illustrate your answer graphically. Your answer:arrow_forwardThe following graph shows a PPC for the imaginary country of Caldonia producing flyboats and time-stopping watches. Suppose a technological change improves production of time-stopping watches. So Caldonia can make more time-stopping watches with the same amount of resources, whereas production of time-stopping watches does not change. Adjust the vertical and horizontal intercepts of the PPC to show the effect of the the technological change on Caldonia's economy. (Hint: Do not move the intercept if the production of a good is not affected.) Quantity of time-stopping watches PPC Quantity of flyboats Before the technological change, point X was first box unattainable inefficient efficient second box unattainable inefficient efficient PPC and after the event, it isarrow_forwardSuppose that in the country of England, two goods can be produced on available agricultural land: wine and wool. Suppose that the opportunity costs of production are constant, so that the PPF is a straight line. Further, when all resources are devoted to wine production, England can produce 200 (thousand) barrels. When all resources are devoted to wool production, England can produce 400 (thousand) bushels of wool.What are the opportunity costs in England of producing a bushel of wool?arrow_forward
- Suppose that a worker in Country A can produce either 6 units of corn or 2 units of wheat per year, and a worker in Country B can produce either 2 units of corn or 6 units of wheat per year. Each nation has 10 workers. Without trade, Country A produces and consumes 30 units of corn and 10 units of wheat per year. Country B produces and consumes 10 units of corn and 30 units of wheat. Suppose that trade is then initiated between the two countries, and Country A sends 30 units of corn to Country B in exchange for 30 units of wheat. Country A will now be able to consume a maximum of Select one: a.30 units of corn and 30 units of wheat. b.40 units of corn and 20 units of wheat. c.40 units of corn and 30 units of wheat. d.10 units of corn and 40 units of wheat.arrow_forwardDraw a new curve, on the same graph, reflecting what the PPC might look like if new production technology is invented to speed up production in both industries. Combination Bananas metric tons (X axis) Coffee metric tons (Y axis) A 20,000 0 B 18,000 11,000 C 14,000 20,000 D 8,000 27,000 E 0 30,000arrow_forwardAssume that the world economy is composed of only two countries (Canada and the United States) and only two goods (steel and wheat). The table below reports the units of steel or wheat per unit of labor in Canada and in the United States Steel per Wheat per unit of labor unit of labor Canada United States 9. 3 Suppose both the US and Canada have 10 units of labor. Use the joint PPF to answer the following: If the two countries are producing 25 units of wheat, what is the opportunity cost of wheat? Hint: draw the PPF and ask what is the slope when 25 units are being produced? 2.5 2.75 3arrow_forward
- In Islandia, a small economy, Jack and Jill shall make their production and consumption decisions together. Jack can produce either 8 kg banana or 8.8 kg tea per day. Jill can produce either 8 kg banana or 19.2 kg tea per day. Suppose now they are open to trade with the rest of the world. The price of banana is $2/kg and the price of tea is $1/kg in the world market. Suppose Islandia is small enough that its behavior will not affect the world prices. If they are going to consume 7 kg banana, then, they will end up consuming a total of [Answer] kg tea. (In decimal numbers, with two decimal places, please.) Please answer with all the steps, to help me understand the solution. Will give a positive rating.arrow_forwardPlease assist; Suppose there are two countries Peru and Japan that produce Food and Fuel. Peru can produce 7,523 units of Food or 17,853 units of Fuel using a labour force of 8000. Japan can produce 5,733 units of Food or 24,156 units of Fuel using a labour force of 5000. (a) On two separate graphs sketch the initial PPF for the two countries with Food on the x-axis. (b) If Japan and Peru employ half its workers to produce Food and half to produce Fuel how much of each good can they consume? Label this point A and A* respectively. (c) Which country has the absolute advantage in food? In fuel? Explain. (d) Which country has the comparative advantage in food? In fuel? Explain. (e) Which good(s) should each country specialize in? (f) Calculate the gains from trade from specialization. (g) If the terms of trade is 2 to 1 in favour of the country with the comparative advantage in food. Determine the combination of the two goods that each country will consume after trade if the country with…arrow_forwardConnect Problem CP 20-05 (algo) If the fictitious country of Islandia puts all of its production resources into fish, it can produce 40 units of fish. If it puts all of its production resources into coconuts, it can produce 20 units of coconuts. If the fictitious country of Mountania puts all of its production resources into fish, it can produce 30 units of fish. If it puts all of its production resources into coconuts, it can produce 10 units of coconuts. Assume that both countries have constant cost functions for both products. Instructions: Round your answers to 2 decimal places. a. What is the opportunity cost of producing 1 unit of fish in Islandia? unit(s) of coconuts b. What is the opportunity cost of producing 1 unit of coconuts in Islandia? unit(s) of fish c. What is the opportunity cost of producing 1 unit of fish in Mountania? unit(s) of coconuts d. What is the opportunity cost of producing 1 unit of coconuts in Mountania? unit(s) of fish e. (Click to select) v has a…arrow_forward
- Z and S.A are trading partners. Both produce metal ores (including lithium) and delivery trucks. Now suppose that if Zimbabwe uses all of its resources, it can produce 50,000 tons of metal ores or 100,000 delivery trucks (trading off at a constant rate). Suppose that if South Africa uses all of its resources, it can produce 20,000 tons of metal ores or 80,000 delivery trucks (trading off at a constant rate). What is the direction of the trade (who exports what to whom)? Be sure to give the opportunity costs of production of both goods for both countries.arrow_forwardAssume that there are two Countries, Gabon and Togo. Togo can either produce 100 tons of Palm oil or 120 meters of cloth using their resources to the maximum and most efficiently. Gabon on the other hand can produce either 180 tons of palm oil or 50 meters of cloth using all their resources to the maximum and most efficiently. Assume that both countries experience constant opportunity cost in production: i) Draw PPF for each country placing palm oil on the y-axis. ii) Identify the comparative advantage for each country. Explain in terms of opportunity cost. iii) Indicate the trend of trade if the two countries had to tradearrow_forwardQuestion 5 Suppose there are two countries Peru and Japan that produce Food and Fuel. Peru can produce 7,523 units of Food or 17,853 units of Fuel using a labour force of 8000. Japan can produce 5,733 units of Food or 24,156 units of Fuel using a labour force of 5000. a) On two separate graphs sketch the initial PPF for the two countries with Food on the x-axis. b) If Japan and Peru employ half its workers to produce Food and half to produce Fuel how much of each good can they consume? Label this point A and A* respectively. c) Which country has the absolute advantage in food? In fuel? Explain. d) Which country has the comparative advantage in food? In fuel? Explain. e) Which good(s) should each country specialize in? f) Discuss the benefits of specialization for each country.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
