Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 2, Problem 18CQ
To determine
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According to comparative advantage, trade between two countries
Group of answer choices
will benefit all the industries in each of the countries.
guarantees that consumption levels will be equal in the two countries.
maximizes the amount of inputs that are used in the production of all products.
allows each of the trading countries to allocate its resources most efficiently.
"The Heckscher-Ohlin Model suggests that the basis of comparative advantage lies primarily in a difference in factor endowments between countries, and that if countries enter into international trade based on that comparative advantage, they will be better off compared to other theories." Discuss this statement
Two countries, A and B, that differ in their opportunity costs for the goods each one of them produces have decided to engage in trade. There is
A. a unique trading ratio of these two goods that will benefit both countries.
B. a unique trading ratio at which Country A will have gains from trade, but Country B will not.
C. a range of trading ratios that lies between the opportunity costs of each good for both countries at which both countries will benefit from trade.
D. a unique trading ratio at which Country B will have gains from trade, but Country A will not.
E. a range of trading ratios that provides gains from trade only to Country A.
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Economics: Private and Public Choice (MindTap Course List)
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- In a situation where two goods can be produced by two different people, it is possible for one person to have a comparative advantage in the production of both goods and the other person to have the comparative advantage in the production of neither good. Group of answer choices True Falsearrow_forwardWhich of the below statements DOES NOT capture Economics? Group of answer choices Economics tells us that there is no theoretical limit to how well we can live or how widely our wealth can spread. The economic prosperity of an economy requires that every person in that economy have a Ph.D. degree. Wheelan argues that the free market system does not make poverty inevitable. Economic development is not a zero-sum game. Even the most prosperous economy will contiue to require certain manual tasks that do not require advanced college degrees. These tasks cannot be replaced with automation. Expecting Ph.D.s or people with professional education to do such tasks will have a high opportunity cost.arrow_forwardComparative advantage does not address Question 10 options: whether specialization and trade benefit more than one party to a trade. whether absolute advantage or comparative advantage that really matters. how are the gains from trade shared among the parties to a trade. whether it possible for specialization and trade to increase total output of traded goods.arrow_forward
- Which of the following statements is NOT true? Group of answer choices In a two-good market, a country can only have absolute advantage in one good. Trade is driven by comparative advantage. Evaluating opportunity costs helps to determine comparative advantage. Countries that focus on producing goods for which they have a comparative advantage specialize.arrow_forwardThe gains from trade are evident in economic models, but seldom observed in the real world. evident in the real world, but impossible to capture in economic models. a result of more efficient resource allocation than would be observed in the absence of trade. based on the principle of absolute advantage.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
- Suppose that research finds a link between high fructose corn syrup (HFCS) and obesity, which then leads American consumers to switch from HFCS products to pure cane sugar products. The graphs show the markets for cane sugar in Haiti and the United States before the studies were divulged. Shift the curves in the graphs, including the horizontal world price curve, to describe the new trade equilibrium that results after the switch in preferences of American households, and then answer the follow‑up question. Assume that the United States and Haiti are the only non‑HFCS sugar trading parties in the world and that there are no quotas, subsidies, or tariffs distorting these markets. According to your graphs, at the new equilibrium a. all Haitian cane sugar consumers benefit. b. cane sugar producers in Haiti benefit. d. cane sugar producers in the United States are worse off.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_forwardTwo countries decide to specialize in producing certain goods to export to other countries, and in return they import different goods from these other countries. The advantage of these exports and imports is: Group of answer choices the country will be able to produce at a point outside your production possibilities frontier. the country will be able to consume at a point outside your production possibilities frontier. the countries will be able to produce and consume at a point outside your production possibilities frontier. the country's production possibilities frontier will shift outward.arrow_forward
- The principal concept behind comparative advantage is that a nation should maximize its volume of trade with other nations use tariffs and quotas to protect the production of vital products for the nation concentrate production on those products for which it has the lowest domestic opportunity cost strive to be self-sufficient in the production of essential goods and services A tariff is a ? Tax Price ceiling Quantity limit Subsidyarrow_forwardConsider the following grading system for a hypothetical economics class: At the end of the semester all the grades for all students are calculated. The instructor then takes one letter grade from the highest scoring students and gives this to the lowest scoring students. This is the grade the instructor submits on the grade sheet to the college registration office. Which economic system is most comparable to the grading system described above? Capitalism Communism Socialism Feudalismarrow_forwardWhich of the assumptions of comparative advantage seem unrealistic? Fixed technology and imperfect competition in the market Unemployment in perfect competition Immobile factors of production and higher transportation costs Fixed technology and imperfect competition in the labour market Free trade and immobile factors of productionarrow_forward
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