Microeconomics - With Connect Plus Access
20th Edition
ISBN: 9781259660849
Author: McConnell
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 24, Problem 1P
To determine
The comparative advantage and specialization by countries.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Assume that the comparative-cost ratios of two products—baby formula and tuna fish—are as follows in the nations of Canswicki and Tunata:
Canswicki: 1 can baby formula ≡ 5 cans tuna fish
Tunata: 1 can baby formula ≡ 7 cans tuna fish
a. In what product should each nation specialize?
Canswicki should produce _____- , and Tunata should produce _____
b. Would the following terms of trade be acceptable to both nations?
i. 1 can baby formula ≡ 4 cans tuna fish: yes or no
ii. 1 can baby formula ≡ 8 cans tuna fish: yes or no
iii. 1 can baby formula ≡ 5.5 cans tuna fish: yes or no
Assume that the comparative-cost ratios of two products— baby formula and tuna fish—are as follows in the nations of Canswicki and Tunata: Canswicki: 1 can baby formula ≡ 2 cans tuna fish Tunata: 1 can baby formula ≡ 4 cans tuna fishIn what product should each nation specialize? Which of the following terms of trade would be acceptable to both nations: (a) 1 can baby formula ≡ 2 1 2 cans tuna fish; (b) 1 can baby formula ≡ 1 can tuna fish; (c) 1 can baby formula ≡ 5 cans tuna fish?
Consider a two country, two goods, one factor (labor) model of international trade. Suppose home country require 1 units of labor to produce a unit of cloth and 1 unit of labor to produce a unit of wine (regardless of output levels). Foreign country requires 2 unit of labor to produce 1 unit of cloth and 1.5 units of labor to produce 1 unit of wine (regardless of output levels).
(a) Which country has the comparative advantage in producing wine? Justify your answer.
(b) Which country has the absolute advantage in producing wine?
(c) Which country will have higher autarky price of wine in terms of cloth?
(d) Suppose after trade, the international relative price settles at a level strictly between the autarky relative prices of the two countries. At the trade equilibrium, show which country will produce wine and which country will produce cloth.
Chapter 24 Solutions
Microeconomics - With Connect Plus Access
Ch. 24.2 - Prob. 1QQCh. 24.2 - Prob. 2QQCh. 24.2 - Prob. 3QQCh. 24.2 - Prob. 4QQCh. 24 - Prob. 1DQCh. 24 - Prob. 2DQCh. 24 - Prob. 3DQCh. 24 - Prob. 4DQCh. 24 - Prob. 5DQCh. 24 - Prob. 6DQ
Ch. 24 - Prob. 7DQCh. 24 - Prob. 8DQCh. 24 - Prob. 9DQCh. 24 - Prob. 10DQCh. 24 - Prob. 11DQCh. 24 - Prob. 12DQCh. 24 - Prob. 13DQCh. 24 - Prob. 14DQCh. 24 - Prob. 1RQCh. 24 - Prob. 2RQCh. 24 - Prob. 3RQCh. 24 - Prob. 4RQCh. 24 - Prob. 5RQCh. 24 - Prob. 6RQCh. 24 - Prob. 7RQCh. 24 - Prob. 8RQCh. 24 - Prob. 9RQCh. 24 - Prob. 10RQCh. 24 - Prob. 11RQCh. 24 - Prob. 12RQCh. 24 - Prob. 13RQCh. 24 - Prob. 1PCh. 24 - Prob. 2PCh. 24 - Prob. 3PCh. 24 - Prob. 4P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- Maximum Feasible Hourly Production Rates (in Tons) of Either Knives or Forks Using All Available Resources Product Knives Forks Country Alpha 9 6 Country Beta 3 12 Use the above table. Assuming constant opportunity costs, if countries Alpha and Beta specialize based on comparative advantage, then Select one: A. Beta should produce both items. B. Alpha should specialize in knives and Beta should specialize in forks. C. Alpha should specialize in producing both items. D. Alpha should specialize in forks and Beta should specialize in knives.arrow_forwardSuppose that a worker in Caninia can produce either 2 blankets or 8 meals per day, and a worker in Felinia can produce either 5 blankets or 1 meal per day. Each nation has 10 workers. For many years, the two countries traded, each completely specializing according to their respective comparative advantages. Now war has broken out between them and all trade has stopped. Without trade, Caninia produces and consumes 10 blankets and 40 meals per day and Felinia produces and consumes 25 blankets and 5 meals per day. The war has caused the combined daily output of the two countries to decline by __________?arrow_forwardsugar, You have been asked to analyze the opportunity costs and comparative advantages to recommend an efficient trading relationship. Consider the production data provided. Prepare a brief report that: 3. Calculate and compare the opportunity costs of producing 1 unit of corn and 1 unit of sugar in each country. Which country has the lower opportunity cost for each good? 2. Determine which good each country has a comparative advantage in producing sugar and which one has a comparative advantage in producing corn. Explain your analysis. 3. Recommend a trading relationship that allows the countries to specialize based on comparative advantage. How would trade Improve economic efficiency? 4. Think about your own interests, skills, and opportunities. In what areas do you potentially have a comparative advantage over your peers or co-workers? Are there goods or services you could provide to others more efficiently? How could you maximize your advantages to achieve positive gains from trade…arrow_forward
- Candonia has a comparative advantage in the production of , while Desonia has a comparative advantage in the production of . Suppose that Candonia and Desonia specialize in the production of the goods in which each has a comparative advantage. After specialization, the two countries can produce a total ofarrow_forwardSuppose there are two countries Peru and Japan that produce Food and Fuel. Peru can produce 7,523 units of Food or 17,853 units of Fuel using a labour force of 8000. Japan can produce 5,733 units of Food or 24,156 units of Fuel using a labour force of 5000. (g) If the terms of trade is 2 to 1 in favour of the country with the comparative advantage in food. Determine the combination of the two goods that each country will consume after trade if the country with the comparative advantage in fuel imports 4000 units of food. Label this point B and B* respectively. h) Who gains from trade? Who loses? What is the impact if any on the world? (i) What should the terms of trade be to make trade beneficial for BOTH Japan and Peru? Explain.arrow_forwardTerms of trade Suppose that Greece and Austria both produce oil and wine. Greece’s opportunity cost of producing a bottle of wine is 4 barrels of oil, while Austria’s opportunity cost of producing a bottle of wine is 10 barrels of oil. By comparing the opportunity cost of producing wine in the two countries, you can tell that ______(Greece / Austria) has a comparative advantage in the production of wine, and ______(Greece / Austria) has a comparative advantage in the production of oil. Suppose that Greece and Austria consider trading wine and oil with each other. Greece can gain from specialization and trade as long as it receives more than _______(1/4barrel / 1/10barrel / 1barrel / 4barrels / 10barrels) of oil for each bottle of wine it exports to Austria. Similarly, Austria can gain from trade as long as it receives more than _______(1/4barrel / 1/10barrel / 1barrel / 4barrels / 10barrels) of wine for each barrel of oil it exports to Greece. Based on answers…arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Economics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage LearningMacroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506756Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage LearningMicroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506893Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Macroeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning