Connect Access Card for Microeconomics
21st Edition
ISBN: 9781259915734
Author: Campbell McConnell, Stanley Brue, Sean Flynn
Publisher: McGraw-Hill Education
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Question
Chapter 26, Problem 6DQ
To determine
The outcomes of quota and tariff.
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In 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 B
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?
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
Chapter 26 Solutions
Connect Access Card for Microeconomics
Ch. 26.2 - Prob. 1QQCh. 26.2 - Prob. 2QQCh. 26.2 - Prob. 3QQCh. 26.2 - Prob. 4QQCh. 26 - Prob. 1DQCh. 26 - Prob. 2DQCh. 26 - Prob. 3DQCh. 26 - Prob. 4DQCh. 26 - Prob. 5DQCh. 26 - Prob. 6DQ
Ch. 26 - Prob. 7DQCh. 26 - Prob. 8DQCh. 26 - Prob. 9DQCh. 26 - Prob. 10DQCh. 26 - Prob. 11DQCh. 26 - Prob. 12DQCh. 26 - Prob. 13DQCh. 26 - Prob. 14DQCh. 26 - Prob. 1RQCh. 26 - Prob. 2RQCh. 26 - Prob. 3RQCh. 26 - Prob. 4RQCh. 26 - Prob. 5RQCh. 26 - Prob. 6RQCh. 26 - Prob. 7RQCh. 26 - Prob. 8RQCh. 26 - Prob. 9RQCh. 26 - Prob. 10RQCh. 26 - Prob. 11RQCh. 26 - Prob. 12RQCh. 26 - Prob. 13RQCh. 26 - Prob. 1PCh. 26 - Prob. 2PCh. 26 - Prob. 3PCh. 26 - Prob. 4P
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- Suppose that the United States limits the amount of steel that can be imported from other countries. Using a PPF that puts units of steel on the horizontal axis and units of another good, such as food, on the vertical axis, explain how such a steel import quota will affect production of food and steel in the United States and alter our consumption possibilities. Will the quota make the United States better off as a whole? If not, will it make anyone in the United States better off? Explain. For 19.21, think of the PPF as that of steel produced in the United States and food produced in the United States (and not as total steel available for use in the United States)arrow_forward12. If the free trade price is lIP and this country imposes a trade tariff of $3, what will be the resulting net welfare loss to the economy? a)$3 b)$27 C)$13.5 d)$40.5 e)$9 13. if the free trade price is IP and this country imposes an import quota of 6 units, what will be the welfare loss to this economy? a)$3 b)$27 c)$13.5 d)$40.5 e)$18arrow_forwardNow suppose that if Zimbabwe uses all of its resources, it can produce 50,000 tons of metal ores or 100,000 delivery trucks (trading off at a constant rate). Suppose that if South Africa uses all of its resources, it can produce 20,000 tons of metal ores or 80,000 delivery trucks (trading off at a constant rate). What is the direction of trade (who exports what to whom)? Be sure to give the opportunity costs of production of both goods for both countries. What is one potential price of metal ores in terms of trucks at which both Zimbabwe and South Africa would benefit from trade? Rank the autarkic prices and the world price of metal ores from lowest to highest.arrow_forward
- 2. In the USA 1 unit of labor can produce 50 cars while in Canada 1 unit of labor can produce5 cars. The total amount of labor in each country is L = 100. Which one of these statements iscorrect?A. Canada has comparative advantage on the production of cars.B. The USA has comparative advantage on the production of cars.C. Since their production possibility frontiers are the similar neither country has comparativeadvantage on the production of cars.D. Not enough information to answer this question.arrow_forwardAnswer th following: If Nation 2 is to enter trade. In what good will it specialize? Why? If Nation 2 is to specialize in the good of its comparative advantage, how much good X and good Y will Nation 2 produce? Suppose after specialization, Nation 2 exports 100 units of the good of its comparative advantage [your answer in 1], how much of X and Y will it consumer after trade Will Nation 2 enjoy welfare gains from trade? Provide evidencearrow_forward3. Be sure to label all points. Suppose the domestic autarky relative price M/S=1 and autarky consumption takes place at point A with (M/S) = (75, 100). Production with free trade takes place at point B with (M, S) = (100, 70). Does the country specialize in the production of M or S? The country exports 15 units of M and 45 units of S are imported. Find the consumption bundle (M, S) and label it point C. Sketch the trade triangle. What are the terms of trade? Evaluate the gains from trade in terms of M for this economy.arrow_forward
- Which of the following is not a part of the WTO's stance on trade ? a . Freer import policy for the cleanest foreign country must be matched by freedom of imports for polluter countries . b . Any trade barrier that reduces greenhouse - gas emissions is permissible c. Tariffs that are implemented to conserve natural resources must not be used merely to shut out foreign goods . d . Any tax on imports must not exceed that on import competing products. .arrow_forwardWith respect to Table 2.5, indicate in each case the commodity in which each nation has a comparative advantage. Suppose that the US exchanges 4W for 4C with the UK. How much does the US gain in terms of cloth? How much does the UK gain in terms of cloth? What is the range for mutually beneficial trade?arrow_forwardSuppose that Poland and Wales both produce ale and glass. Poland's opportunity cost of producing a pane of glass is 4 kegs of ale while Wales's opportunity cost of producing a pane of glass is 12 kegs of ale. By comparing the opportunity cost of producing glass in the two countries, you can tell thatWales has a comparative advantage in the production of glass andPoland has a comparative advantage in the production of ale. Suppose that Poland and Wales consider trading glass and ale with each other. Poland can gain from specialization and trade as long as it receives more than of ale for each pane of glass it exports to Wales. Similarly, Wales can gain from trade as long as it receives more than of glass for each keg of ale it exports to Poland. Based on your answer to the last question, which of the following prices of trade (that is, price of glass in terms of ale) would allow both Wales and Poland to gain from trade? Check all that apply. 8 kegs of…arrow_forward
- Assume that Germany has 1200 units of labor available and it can produce two goods: apples and bananas. The unit labor requirement in apple production is 3, while in banana production it is 2. France has a labor force of 800. France’s unit labor requirement in apple production is 5, while in banana production it is 1. Suppose that Germany does not specialize in the production of the commodity in which it has a comparative advantage but it opens up for trade at the autarky production level. Compare the welfare of the country with the case when country specializes.arrow_forward3. Suppose that in the absence of trade, the U.S. price for bicycles was higher than the world price for bicycles. Would allowing international trade, mean that the U.S. would import or export bicycles? Who in the U.S. would benefit and who would lose with a free trade policy, and would the gains be greater than the losses?arrow_forwardSuppose you examine the bilateral trade flows between Northern Ireland and the Republic of Ireland , England, Scotland and Wales. Which bilateral trade flows do you expect to be larger?Select one:O. a. Between Northern ireland and EnglandO. b. Between Northern ireland and WalesO. c. Between Northern ireland and the Republic of Ireland O. d. Between Northern ireland and Scotlandarrow_forward
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