MACROECONOMICS W/CONNECT
18th Edition
ISBN: 9781307253092
Author: McConnell
Publisher: Mcgraw-Hill/Create
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Question
Chapter 20, Problem 2DQ
To determine
The land, labor and capital intensive goods.
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Students have asked these similar questions
3. The following hypothetical production
possibilities tables are for China and the
United
States. Assume that before
specialization and trade, the optimal
product mix for China is alternative B
and for the United States is alternative
U. LO20.2
a. Are comparative-cost conditions such
that
the
two
countries
should
specialize? If so, what product should
each produce?
b. What is the total gain in apparel and
chemical output that would result
from such specialization?
c. What are the limits of the terms of
trade? Suppose that the actual terms
of trade are 1 unit of apparel for 1 unit
of chemicals and 4 units of apparel for
6 units of chemicals. What are the
gains from specialization and trade for
each nation?
China Production Possibilities
Product
A
B
D
E
F
30
24
6
Apparel (in thousands)
Chemicals (in tons)
18
12
6
12
18
24
30
U.S. Production Possibilities
Product
R
U
V
K pparel (in thousands)
nemicals (in tons)
>
10
8
4
2
4
8
12
16
20
p. 579
3. The following hypothetical production
possibilities tables are for China and the
United States. Assume that before
specialization and trade, the optimal
product mix for China is alternative B
and for the United States is alternative
U. LO20.2
a. Are comparative-cost conditions such
that
the
two
countries
should
specialize? If so, what product should
each produce?
b. What is the total gain in apparel and
chemical output that would result
from such specialization?
c. What are the limits of the terms of
trade? Suppose that the actual terms
of trade are 1 unit of apparel for 1 unit
of chemicals and 4 units of apparel for
6 units of chemicals. What are the
gains from specialization and trade for
each nation?
China Production Possibilities
Product
A
D
F
Apparel (in thousands)
30
24
18
12
Chemicals (in tons)
12
18
24
30
U.S. Production Possibilities
Product
R
T.
V
Apparel (in thousands)
hemicals (in tons)
10
8.
4
4
8.
12
16
20
p. 579
25
20
15
10
LO
0
P
a
0
O
3
(d) areas (b) + (c) + (d) + (e)
(e) areas (a) + (b) + (c) + (d)
e
6
b
O
S
9 12 15 18
25. If the free trade price is IP and this country imposes a trade tariff of $6, the loss to the economy as a result of this tariff is represented by
O(a) area (a) in this graph
(b) area (b) in this graph
(c) areas (c) + (d)
P*
21
IP
D
24 Q
Chapter 20 Solutions
MACROECONOMICS W/CONNECT
Ch. 20.2 - Prob. 1QQCh. 20.2 - Prob. 2QQCh. 20.2 - Prob. 3QQCh. 20.2 - Prob. 4QQCh. 20 - Prob. 1DQCh. 20 - Prob. 2DQCh. 20 - Prob. 3DQCh. 20 - Prob. 4DQCh. 20 - Prob. 5DQCh. 20 - Prob. 6DQ
Ch. 20 - Prob. 7DQCh. 20 - Prob. 8DQCh. 20 - Prob. 9DQCh. 20 - Prob. 10DQCh. 20 - Prob. 11DQCh. 20 - Prob. 12DQCh. 20 - Prob. 13DQCh. 20 - Prob. 14DQCh. 20 - Prob. 1RQCh. 20 - Prob. 2RQCh. 20 - Prob. 3RQCh. 20 - Prob. 4RQCh. 20 - Prob. 5RQCh. 20 - Prob. 6RQCh. 20 - Prob. 7RQCh. 20 - Prob. 8RQCh. 20 - Prob. 9RQCh. 20 - Prob. 10RQCh. 20 - Prob. 11RQCh. 20 - Prob. 12RQCh. 20 - Prob. 13RQCh. 20 - Prob. 1PCh. 20 - Prob. 2PCh. 20 - Prob. 3PCh. 20 - Prob. 4P
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Similar questions
- A small country is facing the following domestic supply curve of a product: S = 200 + 20P, as well as the following domestic demand curve of a product: D = 400 - 20P. It can import it at a world price of 10 per unit. In addition, each unit of production yields a marginal social benefit of 10. The effect on welfare of an import tariff of 6 per unit is $. O -420 O 500 O -480 O 420 O 320 -500 O :180 O -320 480 O 180arrow_forward5. Suppose that the comparative-cost ratios of two products- baby formula and tuna fish-are as follows in the hypotheti- cal nations of Canswicki and Tunata: Canswicki: 1 can baby formula = 2 cans tuna fish 1 can baby formula = 4 cans tuna fish Tunata: In what product should each nation specialize? Explain why terms of trade of 1 can baby formula = would be acceptable to both nations. 25 cans tuna fisharrow_forwardGovernments sometimes erect barriers to trade other than tariffs and quotas. Which of the following is not an example of this type of trade barrier? O a requirement that imports meet health and safety requirements restrictions on imports for national security reasons 4 O a requirement that the employees of domestic firms that engage in foreign trade pay income taxes O a requirement that the U.S. government buy military uniforms only from US, manufacturersarrow_forward
- American apparel makers complain to Congress about competition from China. Congress decides to impose either a tariff or a quota on apparel imports from China. Which policy would Chinese apparel manufacturers prefer? LO26.4 a. Tariff. b. Quota.arrow_forwardPrice (dollars per shirt) 44 40 36 32 28 24 20 16 12 O 8 O 32 million The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt. 24 million S In the figure above, with the tariff the United States imports 8 million D O 16 million 16 24 32 40 48 56 64 Quantity (millions of shirts per year) million shirts per year.arrow_forwardSuppose that two countries can produce wheat or cotton. If country A produces only wheat it can produce 38 units of wheat, and if it only produces cotton it can produce 45 units of cotton. If country B produces only wheat it can produce 27 units of wheat, and if it only produces cotton it can produce 35 units of cotton. Given the production possibilities frontiers above which of the following would be feasible terms of trade between country A and country B? O a. One unit of cotton for 0.92 units of wheat. O b. One unit of cotton for 0.72 units of wheat. O c. One unit of wheat for 1.08 units of cotton. O d. One unit of wheat for 1.35 units of cotton. O e. None of the other answers are feasible terms of trade.arrow_forward
- Suppose Big Country can produce 80 units of X by using all its resources to produce X or 60 units of Y by devoting all its resources to Y. Comparable figures for Small Nation are 60 units of X and 60 units of Y. Assuming constant costs, in which product should each nation specialize? Explain why. What are the limits of the terms of trade between these two countries? How would rising costs (rather than constant costs) affect the extent of specialization and trade between these two countries?arrow_forward25 20 15 10 LO 5 P COUNTRY 1 s1 IP d1 EQ 0 0 3 6 9 1215182124 INTERNATIONAL MARKET P 25 20 15 10 5 0 0 3 6 9 12 15182124 Under open trade, who will gain and who will lose in country 2? O a) consumers gain and producers lose. b) producers gain and consumers lose. c) both producers and consumers lose. O d) the poor lose and the rich gain. S2 S1 IP D2 D1 Q P COUNTRY 2 25 20 15 10 5 d2 0 0 3 6 9 1215182124 Q s2 IParrow_forwardIn Country A, the production of 1 bicycle requires using resources that could otherwise be used to produce 11 lamps. In Country B, the production of 1 bicycle requires using resources that could otherwise be used to produce 15 lamps. Which country has a comparative advantage in making bicycles? LO26.2 a. Country A. b. Country Barrow_forward
- Givenw: (1) two nations (1 and 2) which have the sametechnology but different factor endowments and tastes, (2)two commodities (X and Y) produced under increasingcosts conditions and (3) no transportation costs, tariffs orother obstructions to trade.Prove geometrically that mutually advantageous tradebetween the two nations is possible.Note: Your answer should show the autarky (no-trade) andfree-trade points of production and consumption for eachnation, show gains from trade of each nation and expressthe equilibrium condition that should prevail when trade Stop equilibrumarrow_forwardThe graphs below show domestic supply and demand curves for a good in two countries, with prices measured in the same currency. If these are the only two countries in the world and if they open to free international trade, O. Demanders of the good in Country A will benefit from trade. O. Suppliers of the good in Country A will benefit from trade. O. The welfare of Country A as a whole will fall. O. The quantity of the good demanded in Country B will become larger. O. The price of the good in both countries will be the one labeled PB.arrow_forwardFigure: Trade 1 Price $200 175 150 Domestic Supply 500 7501,000:1,300 1,150 World Supply + Tariff World Supply Domestic Demand Quantity If the world price for the good in this figure is higher than the domestic price, a move to free international trade means that the domestic economy will become: O either a net importer or a net exporter of the good, but it is impossible to say which. O a net importer of the good. neither a net importer nor a net exporter of the good. a net exporter of the good.arrow_forward
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