MICROECONOMICS(LL)COMPANION
21st Edition
ISBN: 9781260713541
Author: McConnell
Publisher: MCG
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Chapter 26.2, Problem 2QQ
To determine
Opportunity Cost .
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Exercise: production per unit of labour:
US: Wheat 300, Beef 100
Argentina: Wheat 20, Beef 20
a. Does either country have an absolute advantage in the production of wheat or beef? Explain
b. What is the opportunity cost of wheat in each country?
c. What is the opportunity cost of beef in each country?
d. Analyze comparative advantage and opportunities for trade between the U.S. and Argentina.
Suppose there are two countries Peru and Japan that produces 7,523 units ofFood 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 5,000.
d) Which country has the comparative advantage in food? In fuel? Explain.
e) Which good(s) should each country specialized in?
Using the numbers in the table, determine which country has a comparative advantage in producing each product.
Output per Hour of Work
Switzerland
Canada
Smartphones
8
5
Which of the following statements is true?
A. The opportunity cost for Canada to produce one Smartphone is 0.60 Fitness Bracelet.
B. The opportunity cost for Switzerland to produce one Fitness Bracelet is 1.25 Smartphones.
OC. The opportunity cost for Switzerland to produce one Smartphone is 0.80 Fitness Bracelet.
OD. The opportunity for Canada to produce one Smartphone is 1.67 Fitness Bracelets.
Fitness Bracelets
10
3
Chapter 26 Solutions
MICROECONOMICS(LL)COMPANION
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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- 1. Determine which country has a comparative advantage in each good. 2. If Country A and Country B each have 100 units of labour, calculate the maximum production of each good for both countries. 3. In the absence of trade, Country B uses 20% of its total labour units to produce steel and the rest to produce oil. Country A uses 60% of its total labour units to produce steel and the rest to produce oil. Calculate how many tonnes of steel and oil can be produced by both countries. 4. Both countries agree that one tonne of steel can be exchanged for one tonne of oil. Calculate the gains after trade is allowed if Country A consumes 30 tonnes of oil domestically.arrow_forwardArgentina and Brazil are considering the potential gains of trade. There is only one factor of production: labor. There are only two goods being produced in either economy: coffee and wine. Argentina can employ 10,000 hours of labor per month. Producing 1 lb. of coffee requires 2 hours of labor, and producing 1 bottle of wine requires 4 hours of labor, in Argentina. Similarly, Brazil can employ 10,000 hours of labor per month. Producing 1 lb. of coffee requires 1 hour of labor, and producing 1 bottle of wine requires 5 hours of labor, in Brazil.arrow_forwardA typical Australian farmer can produce 8000 lbs of wheat or 500 lbs of potatoes per year. A typical Canadian farmer can produce 5000 lbs of wheat or 400 lbs of potatoes per year. Who has the comparative advantage in producing potatoes? a. Canada b. Australia explain!!!arrow_forward
- 1. Suppose 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. a) Which country has the comparative advantage in food? In fuel? Explain. b) Which good(s) should each country specialize in? c) Discuss the benefits of specialization for each country.arrow_forwardMicrochips 90 U.S. PPF Which country has comparative advantage in the production of Microchips? Which country has comparative advantage in the production of Brooms? Which country has absolute advantage in the production of Microchips? Which country has absolute advantage in the production of Brooms? Microchips Brooms [Choose ] [Choose ] [Choose ] [Choose ] 10 MEXICO PPF Broomsarrow_forwardNew Zealand in one year can raise 75 tons of beef or produce 750 boxes of tulips. In the same growing season, Belgium can raise 40 tons of beef or produce 650 boxes of tulips. From this information, we know that: A) New Zealand has a comparative advantage in raising beef. B) New Zealand has a comparative advantage in raising tulips. C) Belgium has a comparative advantage in raising beef. O D) Belgium has an absolute advantage in raising beef.arrow_forward
- Please use the following table to select the right choice. Country England Portugal Hours of work necessary to produce one unit Cloth Wine 100 120 90 80 England has absolute advantage in producing cloth. O England has no comparative advantage in either of the products. England has comparative advantage in producing cloth. Portugal has no comparative advantage in either of the products.arrow_forwardArgentina can produce 2 pounds of coffee OR 1 bottle of wine. Brazil can produce 5 pounds of coffee OR 1 bottle of wine. Which country has a comparative advantage in the production of wine? a. both Argentina and Brazil. b. Argentina. c. neither Argentina nor Brazil. d. Brazil.arrow_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. (d) Which country has the comparative advantage in food? In fuel? Explain. (e) Which good(s) should each country specialize in?arrow_forward
- Computers wheat Country A 10 Country B 6. Table shows the number of hours of labor required to produce 1 unit of output of computers and wheat in country A and B. a. Country . has an absolute advantage in computers. b. Country . has an absolute advantage in wheat. c. Country . has a comparative advantage in computers. d. Country . has a comparative advantage in wheat. Price ratio( computers/wheat) should be between. е. and ....... for free trade.arrow_forwardComputers wheat Country A 10 4 Country B 6. 3 Table shows the number of hours of labor required to produce 1 unit of output of computers and wheat in country A and B. a. Country. . has a comparative advantage in computers. b. Country. . has a comparative advantage in wheat. Price ratio( computers/wheat) should be between C. and for free trade. . ...... ...........arrow_forwardAccording to the theory of comparative advantage, a country exports goods when it can produce those goods countries. Select one: OA. at a higher opportunity cost OB. using more resources OC. at a lower opportunity cost OD. using fewer resources than otherarrow_forward
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