Bundle: Exploring Macroeconomics, Loose-leaf Version, 7th + LMS Integrated MindTap Economics, 1 term (6 months) Printed Access Card
7th Edition
ISBN: 9781305784802
Author: Robert L. Sexton
Publisher: Cengage Learning
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Chapter 20, Problem 7P
To determine
To explain:
The effect on absolute and
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Check out a sample textbook solutionStudents have asked these similar questions
If Italy is said to have an absolute advantage over the United States in the production of wheat, this means that, given the
same resources,
the United States must have a comparative advantage over Italy in the production of wheat.
Italy must have an absolute advantage over the United States in producing all goods.
the United States must have an absolute advantage in producing some good other than wheat.
Italy can produce more wheat than the United States.
Italy has an absolute advantage in all goods that are complements to wheat.
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.
Chapter 20 Solutions
Bundle: Exploring Macroeconomics, Loose-leaf Version, 7th + LMS Integrated MindTap Economics, 1 term (6 months) Printed Access Card
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- While 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_forwardGhana imports and exports food from and to neighbouring Côte d'Ivoire. The latter nation is very similar to Ghana in most ways. It has a similar environment, a similar level of education, and similar institutional background. Would you argue that trade between the two countries can be explained by comparative advantage? Why or why not? Ghana also exports food to Switzerland. The latter nation is very different to Ghana in most ways. Would you argue that trade between the two countries can be explained by comparative advantage? Why or why not?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
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