Concept explainers
The difference between
Explanation of Solution
Comparative advantage refers the ability of a nation to produce goods and services at a lower
Absolute advantage: Absolute advantage refers to the ability to produce a good using fewer inputs than another producer does.
Comparative advantage: Comparative advantage refers to the ability to produce a good at a lower opportunity cost than another producer.
Want to see more full solutions like this?
Chapter 2 Solutions
PRINCIPLES OF MACROECONOMICS-CONNECT ACC
- Ecuador’s biggest export is crude petroleum (unprocessed), 63% of which it exports to the United States, and Ecuador’s biggest import is refined petroleum (processed), of which it imports 70% from the United States. Based on this information, which of the following statements is true? Group of answer choices Ecuador has comparative advantage in extracting crude petroleum; the US has comparative advantage in producing refined petroleum. Not enough information. The US has comparative advantage in extracting crude petroleum; Ecuador has comparative advantage in producing refined petroleum. Ecuador has absolute advantage in extracting crude petroleum and the US has absolute advantage in producing refined petroleum.arrow_forwardA country may specialize in the production of a good that it can produce at a lower opportunity cost than its trading partners. Because of this comparative advantage, countries benefit when they specialize and trade with each other. The following graphs show the production possibilities curves (PPCs) for Freedonia and Sylvania. Both countries produce grain and tea, each initially (i.e., before specialization and trade) producing 24 million pounds of grain and 12 million pounds of tea, as indicated by the grey stars marked with the letter A. Freedonia has a comparative advantage in the production of , while Sylvania has a comparative advantage in the production of . Suppose that Freedonia and Sylvania specialize in the production of the goods in which each has a comparative advantage. After specialization, the two countries can produce a total of million pounds of tea and million pounds of grain. Suppose that Freedonia and Sylvania agree to trade. Each country focuses its…arrow_forwardThe diagram below shows a natural monopoly. If the firm is unregulated, how much deadweight loss will there be? 2$ 100 76 60 56 48 АТС 36 MC 20 MR 288 360 Q 84 144 180 204arrow_forward
- A country may specialize in the production of a good that it can produce at a lower opportunity cost than its trading partners. Because of this comparative advantage, countries benefit when they specialize and trade with each other. The following graphs show the production possibilities curves (PPCs) for Candonia and Lamponia. Both countries produce grain and coffee, each initially (i.e., before specialization and trade) producing 12 million pounds of grain and 6 million pounds of coffee, as indicated by the grey stars marked with the letter A. 32 28 B COFFEE (Millions of pounds) 24 16 12 0 PPC 14 Candonia A 8 24 12 16 20 GRAIN (Millions of pounds) 28 32 ? COFFEE (Millions of pounds) 32 28 24 20 16 12 4 0 10 PPC 4 Lamponia A 4 11 8 12 16 20 24 GRAIN (Millions of pounds) 26 32 ?arrow_forwardJessica Alba, a famous actress, starts the baby and family products business, The Honest Company, with Christopher Gavigan. Alba and Gavigan set up their site so families can choose what kinds of non-toxic, all-natural products they'd like to use and get them in a bundle. Families can choose all kinds of products from food to hygiene necessities and cleaning supplies. Suppose they are thinking of expanding their business into five domestic markets: Phoenix, Dallas, Chicago, New York, and Atlanta. Assume their primary goal of business is to maximize economic profits, although they want to do business honestly.Show all your calculations and process. Describe your answer for each question in three- to five-complete sentences. You are a business adviser for Alba and Gavigan. Describe a skimming price and a penetration price, and advise them whether they should charge a skimming price or a penetration price, with supportive reasoning for and against each pricing alternative. Are they…arrow_forwardWhen a country has a comparative advantage in the production of a good, it means that it can produce this good at a lower opportunity cost than its trading partner. Then the country will specialize in the production of this good and trade it for other goods. The following graphs show the production possibilities frontiers (PPFS) for Yosemite and Congares. Both countries produce corn and lentils, each initially (ie, before specialization and trade) producing 6 million pounds of corn and 3 million pounds of lentils, as indicated by the grey stars marked with the letter A. LENTILS (MEns of pounds 0 0 194 2 Yout 4 10 CORN (Mof pounds) 14 16 LENTILS (Mons of pounds 0 2 Yosemite has a comparative advantage in the production of production of comparative advantage. After specialization, the two countries can produce a total of comm. Conger L 10 12 COHN (Mof pounds) 14 16 (?) conn while Congaree has a comparative advantage in the -Suppose that Yosemite and Congaree specialize in the production…arrow_forward
- When a country specializes in the production of a good, this means that it can produce this good at a lower opportunity cost than its trading partner. Because of this comparative advantage, both countries benefit when they specialize and trade with each other. The following graphs show the production possibilities frontiers (PPFS) for Freedonia and Sylvania. Both countries produce lemons and sugar, each initially (i.e., before specialization and trade) producing 24 million pounds of lemons and 12 million pounds of sugar, as indicated by the grey stars marked with the letter A. SUGAR (Millions of pounds) 64 56 48 40 32 24 16 8 0 0 PPF 1 Freedonia 24, 12 8 16 24 32 40 48 LEMONS (Millions of pounds) 56 64 (?) SUGAR (Millions of pounds) 64 56 48 40 32 24 16 8 0 PPF 0 8 Sylvania A 16 24 32 40 48 56 64 LEMONS (Millions of pounds) (?) Freedonia has a comparative advantage in the production of while Sylvania has a comparative advantage in the production of . Suppose that Freedonia and Sylvania…arrow_forwardSpecialization and trade When a country has a comparative advantage in the production of a good, it means that it can produce this good at a lower opportunity cost than its trading partner. Then the country will specialize in the production of this good and trade it for other goods. The following graphs show the production possibilities frontiers (PPFs) for Shenandoah and Congaree. Both countries produce peas and lentils, each initially (i.e., before specialization and trade) producing 36 million pounds of peas and 18 million pounds of lentils, as indicated by the grey stars marked with the letter A. Shenandoah has a comparative advantage in the production of PEAS or LENTILS or NEITHER PEAS OR LENTILS or BOTH PEAS AND LENTILS. while Congaree has a comparative advantage in the production of PEAS or LENTILS or NEITHER PEAS OR LENTILS or BOTH PEAS AND LENTILS. Suppose that Shenandoah and Congaree specialize in the production of the goods in which each has a comparative…arrow_forwardWhen a country specializes in the production of a good, this means that it can produce this good at a lower opportunity cost than its trading partner. Because of this comparative advantage, both countries benefit when they specialize and trade with each other. The following graphs show the production possibilities frontiers (PPFS) for Freedonia and Sylvania. Both countries produce potatoes and tea, each initially (i.e., before specialization and trade) producing 12 million pounds of potatoes and 6 million pounds of tea, as indicated by the grey stars marked with the letter A. Freedonia Sylvania 32 32 28 28 24 PPF 24 20 20 16 16 12 12 PPF 8 8 4 4 4 8 12 16 20 24 28 32 4 8 12 16 20 24 28 32 POTATOES (Millions of pounds) POTATOES (Millions of pounds) Freedonia has a comparative advantage in the production of while Sylvania has a comparative advantage in the production of Suppose that Freedonia and Sylvania specialize in the production of the goods in which each has a comparative…arrow_forward
- Q58 Suppose Spain is currently producing 90 units of wine and 10 units of cheese, but to produce 10 more units of cheese it must sacrifice 30 units of wine. Further, suppose that Portugal produces 45 units of wine and 45 units of cheese, but to produce 10 more units of cheese it must sacrifice only 10 units of wine. It can be concluded that... a. More information is needed to conclude anything about comparative advantage in either country. b. Portugal has an absolute advantage in wine production and Spain has an absolute advantage in cheese production. c. Spain has a comparative advantage in the production of wine and Portugal has a comparative advantage in the production of cheese. d. Spain has an absolute advantage in both wine and cheese production. e. Portugal has an absolute advantage in both wine and cheese production.arrow_forwardHelp please Level 2: Opportunity Cost, Comparative Advantage, and Specialization You have decided to specialize in gathering firewood while Friday has specialized in fishing. Your time allocation sliders are set to allocate all of your time to gathering firewood. Now, use the additional sliders to state how many logs you will trade to Friday and how many fish you want in return. You must select a trade that make both you and Friday better off than you were before specialization and trading. In other words, you must both receive more than 2000 calories of fish and 32 logs of firewood. Both you and Friday’s consumption point is displayed on the PPF graphs as you adjust the trade. There is a bar for me to slide over for fish and firewood for the number of hours (12 ohours total to be be used between both)arrow_forwardHow do comparative advantage and absolute advantage differ? Absolute advantage means more can be made given the resources while comparative advantage means the good may be made cheaper given the other items that could also be produced. Absolute advantages is a relative concept when comparing production of different items, and comparative advantage means a country is better at at one particular good. Comparative advantage implies a country is better at producing everything better than another country and absolute advantage means they're better at a few things. Comparative advantage refers to production of agricultural goods while absolute advantage refers to industrial production.arrow_forward
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education