EBK EXPLORING MACROECONOMICS
7th Edition
ISBN: 9780100546400
Author: Sexton
Publisher: YUZU
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Chapter 20, Problem 7P
To determine
To explain:
The effect on absolute and
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Use the following table to answer
a)According to the opportunity cost associated with specialization of each product, if both countries decide to trade with each other (no protectionism), which product will England specialize?
b)According to the opportunity cost associated with specialization of each product, if both countries decide to trade with each other (no protectionism), which product will Portugal specialize?
c)Please calculate the opportunity cost of specializing in one single production (fill in the opportunity cost of each cell below).
Which of the following best explains the concept of "Comparative Advantage" in international trade? a) A country should produce goods
in which it has an absolute advantage and trade for those where it does not. b) A country should only export goods and import nothing
to maintain a positive trade balance. c) A country should specialize in the production of goods for which it has the lowest opportunity
cost compared to other countries. d) A country should diversify its production across various sectors to avoid dependence on a single
export commodity.
If Argentina imports manufacturing parts from Guatemala, and Guatemala imports delivery trucks from Argentina, how could you best describe the pattern of trade?
Group of answer choices
Guatemala must have an absolute advantage in producing manufacturing parts.
The opportunity cost of producing delivery trucks is higher in Argentina than it is in Guatemala.
Argentina is protecting its delivery truck production industry.
The opportunity cost of producing manufacturing parts in Argentina is higher than it is in Guatemala.
Chapter 20 Solutions
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- The world has two countries, A and Z, which each produce two products, gadgets and whizbangs. Without world trade, the domestic price of gadgets in A is lower than the price of gadgets in Z. We can say that Country Z has a comparative advantage in gadgets and should be exporting them. Country Z should specialize in producing gadgets. Country A has a comparative advantage in gadgets and should be exporting them. Country A has a comparative advantage in whizbangs and should be importing them.arrow_forwardWhile different natural resources and the theory of comparative advantage can explain many trade patterns, they cannot explain all types of trade that economists observe. Consider each scenario in the following table and determine which theory best explains the trade pattern described. Dynamic Comparative Advantage Product Life Cycle Theory Intra-Industry Specialization Scenario For many years, microchip firms in the nation of Tablon have struggled with high production costs compared to firms in the nation of Ghovia, because Tablon's soldering tools are outdated, forcing workers to work slowly. As a result, most microchips are made in Ghovia and exported. An inventor employed by a firm in Tablon comes up with a new way to solder chips that makes workers 40% more efficient. This innovation reduces costs and allows the firms in Tablon to take over the microchip market. In response, firms in Ghovia start to research how they can update their factories to be more cost effective. In the…arrow_forwardGiven the information as follows: Consider the following model of trade between Vietnam and France. Assume throughout that those two countries are the only two countries in the world, at least for purposes of trade. There are two goods: Rice and Beef. Consumers always spend 1/4 of their income on rice and the remainder on beef. The only factor of production is labor. Each Vietnamese worker can produce 2 unit of Rice or 1 unit of beef per unit of time, while each French worker can produce 1 units of rice or 3 units of beef per unit of time. There are 100 million workers in Vietnam and 70 million in France. a. Determine the product brings higher wealth to each country. b. Determine the pattern of trade for both countries using Ricardian model. Draw the world relative supply curve. c. What is the benefit of each country when joining international trade following Ricardian model? Draw the graph to clarify your idea.arrow_forward
- Which of the following BEST describes comparative advantage? Country A can produce a product at a lower opportunity cost than Country B Country A can produce more of a product than Country B Country A has a currency worth more than the currency of country B Country A uses a smaller amount of a resource to produce than Country Barrow_forwardFinally, Canada and Australia are both English-speaking countries with not-too dissimilar population sizes. However, Canada’s trade is twice as large as that of Australia’s. to what extent, does comparative advantage help explain this?arrow_forwardSuppose that Country A can produce 6060 bags of sugar or 3030 bags of flour per worker hour. Country B can produce 4040 bags of sugar or 1010 bags of flour per worker hour. Assume that there is 100%100% specialization, and each country has 55 worker hours.If each country specializes in its comparative advantage, calculate the quantity of the good that Country B should produce.arrow_forward
- Country X can produce 1,000 units of food and 2,000 units of clothes. Country Y can produce 1,000 units of food and 1,000 units of clothes. In order to maximize trade according to the principles of comparative advantage, country X should produce food and import clothes from country Y. country Y should produce food and import clothes from country X. country X and Y should produce both food and clothes to meet their own needs. country Y should produce both food and clothes, and import additional clothes from country X.arrow_forwardNeed help with economicsarrow_forwardThe demand for cameras in a certain country is given by D=8000−30P, where P is the price of a camera. Supply by domestic camera producers is S=4000+10P. Suppose that world price of a camera is $150. If this country decides to trade, which of the following is true? Group of answer choices 3000 cameras will be exported Domestic production of cameras will decrease by 500 Domestic production of cameras will increase by 500 2000 cameras will be importedarrow_forward
- Suppose that Vietnam has the usual demand and supply curves for producing computers while Myanmar only has a typical demand curve, but it cannot produce computers. Use the three-panel diagram described in Week 2 lecture content to: Show in a set of graphs the free-trade equilibrium for computers. Indicate the equilibrium world price. How does this world price compare to the no-trade price in Vietnam? Indicate how many computers are traded under free international trade. Make sure to state the assumptions. Show graphically and explain the effects of the shift from no trade to free trade on surpluses in each country. Indicate the net national gain or loss from no trade to free trade for each country. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardAccording to the concept of comparative advantage, a good should be produced in that nation where: its domestic opportunity cost is greatest. money is used as a medium of exchange. its domestic opportunity cost is least. the terms of trade are maximizedarrow_forwardAccording to the concept of comparative advantage, a good should be produced in that nation where: its domestic opportunity cost is least. money is used as a medium of exchange. its domestic opportunity cost is greatest. the terms of trade are maximized.arrow_forward
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