Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506893
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 2, Problem 10CQ
To determine
Importance of exchange to nation’s prosperity and the impact of trade in the economy.
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Students have asked these similar questions
Steve and Craig have been shipwrecked on a deserted island in the South Pacific. Their economic activity consists of either gathering pineapples or fishing. We know Steve can catch four fish in one hour or harvest two baskets of pineapples. In the same time Craig can reel in two fish or harvest two baskets of pineapples.
If Steve and Craig don't trade with each other, who is better off? Why?
If money is a neutral medium of exchange, as Adam Smith defined it, why does money today divide nations? Draw 2 analogies explaining this situation, by using Adam Smith’s arguments?
As a student of the subject “The Contemporary World”, explain the reason why it is necessary for most, if not all, nations in the world to engage in diplomacy at all cost?
Chapter 2 Solutions
Microeconomics: Private and Public Choice (MindTap Course List)
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- An 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_forwardWhy is alliance very important in the Chinese economic agenda?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
- Describe an important trade-off you recently facedarrow_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_forwardUnderstand why even in a society in which one person is better than a second at all tasks, it is still beneficial for the two to specialize and trade. For each of the following, describe some of the potential opportunity costs: A) A foreign government subsidizes its national airline to keep airfares down B) Upgrading to a balcony suite for your cruise around the Mediterranean Sea C) Staying up all night to watch season 5 of Game of Thronesarrow_forward
- How can a nation use opportunity cost to achieve trade benefits? Group of answer choices By producing a product where it has the lowest opportunity cost and trading for products where it doesn’t have comparative advantage By analyzing the opportunity costs of potential trading partners and then trading only with those who have the same opportunity cost for producing the same good By improving production so that it has the lowest opportunity cost in all products By producing a product where it has the highest opportunity cost and then trading for any product where it has the absolute advantage in production.arrow_forwardBased upon those notions of self-interest and public interest and the bringing of both into harmony, according to Adam Smith, how would a market economy accomplish that harmony about which he describes? What is government's place in that market economy? What about incentives as opposed to free offerings? What about trade?arrow_forwardWhich statement is true? Group of answer choices If one party is more productive in producing both products, it has a comparative advantage in producing both goods None of the listed statements are true A party can have a comparative disadvantage in producing both goods A party has the comparative advantage in producing a good if it has the absolute advantage in producing the other good If parties specialise and trade, it is only the less productive party that can experience any gains from tradearrow_forward
- Discuss whether a government should always pursue a policy of free trade? arrow_forwardYour rich great uncle left you some money to buy a new car. If you plan to purchase a foreign car, how might trade barriers impact the price that you have to pay for that car?arrow_forwardIndicate True (T) or False (F) for the following questions, and explain your answer in 50 words "Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods."arrow_forward
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