Study Guide for Mankiw's Brief Principles of Macroeconomics, 7th
7th Edition
ISBN: 9781285864266
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 3, Problem 5PA
Subpart (a):
To determine
Calculate
Subpart (b):
To determine
Comparative advantage.
Subpart (c):
To determine
Gains from the trade.
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Home has a comparative advantage in wheat, and Foreign has a comparative advantage in cloth. Once trade occurs, Home produces 1,500 bushels of wheat, and Foreign produces 1,000 yards of cloth. The following table shows the amount of wheat that Home is willing to trade to acquire more cloth.
the international price of cloth is 1.5 bushels of wheat per yard, how many bushels of wheat will Home export to Foreign?
Select one:
a. 550 bushels
b. 800 bushels
c. 1,050 bushels
d. 700 bushels
What is the opportunity cost of a pair of shoes in Mexico?
What is the opportunity cost of a pair of shoes in Nicaragua ?
Which country has a comparative advantage in the production of shoes?
Which country has a comparative advantage in the production of clothing?
In this example, the country of Mexico should export ----------and import ----------------.
Will a country import or export products for which it has a comparative advantage? Explain.
Chapter 3 Solutions
Study Guide for Mankiw's Brief Principles of Macroeconomics, 7th
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- In Japan, one worker can make 5 tons of rubber or 80 radios. In Malaysia, one worker can make 10 tons of rubber or 40 radios. Who has the absolute advantage in the production of rubber or radios? How can you tell? Calculate the opportunity cost of producing 80 additional radios in Japan and in Malaysia. (Your calculation may involve fractions, which is fine,) Which country has a comparative advantage in the production of radios? Calculate the opportunity cost of producing 10 additional tons of rubber in Japan and in Malaysia. Which country has a comparative advantage in producing rubber? In this example, does each country have an absolute advantage and a comparative advantage in the same good? In what product should Japan specialize? In what product should Malaysia specialize?arrow_forwardBrazil can produce 100 pounds of beef or 10 autos. In contrast the United States can produce 40 pounds of beef or 30 autos. Which country has the absolute advantage in beef? Which country has the absolute advantage in producing autos? What is the opportunity cost of producing one pound of beef In Brazil? What is the opportunity cost of producing one pound of beef in the United States?arrow_forwardEngland and Scotland both produce scones and sweaters. Suppose that an English works can produce 50 scones per hour or 1 sweater per hour. Suppose that a Scottish worker can produce 40 scones per hour or 2 sweaters per hour. a. Which country has the absolute advantage in the production of each good? Which country has the comparative advantage? b. If England and Scotland decide to trade, which commodity will Scotland trade to England? Explain. c. If a Scottish worker could produce only 1 sweater per hour, would Scotland still gain from trade? Would England still gain from trade? Explain.arrow_forward
- Suppose that in a year an American worker can produce 100 shirts or 20 computers and a Chinese worker can produce 100 shirts or 10 computers.a. For each country, graph the production possibilities frontier. Suppose that without trade the workers in each country spend half their time producing each good. Identify this point in your graphs.b. If these countries were open to trade, which country would export shirts? Give a specific numerical example and show it on your graphs. Which country would benefit from trade? Explain.c. Explain at what price of computers (in terms of shirts) the two countries might trade.arrow_forwardAn average worker in Brazil can produce an ounce of soybeans in 20 minutes and an ounce of coffee in 60 minutes, while an average worker in Peru can produce an ounce of soybeans in 50 minutes and an ounce of coffee in 75 minutes.a. Who has the absolute advantage in coffee? Explain.b. Who has the comparative advantage in cof-fee? Explain.c. If the two countries specialize and trade with each other, who will import coffee? Explain.d. Assume that the two countries trade and that the country importing coffee trades 2 ounces of soybeans for 1 ounce of coffee. Explain why both countries will benefit from this trade.arrow_forwardCountry A can produce 20 units of wheat or 10 units of corn, while Country B can produce 15 units of wheat or 5 units of corn. Which country has the comparative advantage in producing wheat?arrow_forward
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