EBK STUDY GUIDE FOR MANKIW'S PRINCIPLES
7th Edition
ISBN: 9781337509848
Author: Mankiw
Publisher: VST
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Question
Chapter 3, Problem 6CQQ
To determine
The gain from a trade based on comparative advantage .
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An 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.
Debra can make either 12 cakes or 16 cookies in 4 hours. Sam can make either 6 cakes or 12 cookies in 4 hours.c. If both Debra and Sam concentrate on producing only the product in which they havea comparative advantage, how many cakes and how many cookies will they produce?
England 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.
Chapter 3 Solutions
EBK STUDY GUIDE FOR MANKIW'S PRINCIPLES
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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_forwardPoints on Production Possibilities Frontier Canada China Wheat Computers Wheat Computers A 150 0 90 0 B 100 25 60 60 C 50 50 30 120 D 0 75 0 180 Draw the production possibilities graph for Canada and China and label all of the points on the graph. For which good does Canada have a comparative advantage? For which good does China have a comparative advantage? If Canada and China decide to specialize and trade, how many more computers and bushels of wheat would be available for consumption by both countries? Show the increase on your graphs. Canada and China decide to impose trade restrictions in the form of a tariff on the computers and wheat. What are the costs or benefits to the consumer, producer and government for each country?arrow_forward
- Sean and Yvette are farmers. Each one owns a 12-acre plot of land. The following table shows the amount of alfalfa and barley each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing alfalfa or barley or to produce alfalfa on some of the land and barley on the rest. Sean Yvette BARLEY (Bushels) On the following graph, use the blue line (circle symbol) to plot Sean's production possibilities frontier (PPF), and use the purple line (diamond symbol) to plot Yvette's PPF. 120 108 96 84 72 60 48 36 24 12 0 0 Alfalfa Barley (Bushels per acre) (Bushels per acre) 18 6 28 7 60 120 180 240 300 380 420 480 540 600 ALFALFA (Bushels) Sean's PPF Yvette's PPF (?)arrow_forwardSuppose that two countries can both produce cars and cotton. The opportunity cost of a car in Country A is 50 units of cotton and the opportunity cost of a car in country B is 300 units of cotton. In this example a. None of these. b. Country A has a comparative advantage in cotton. c. Country B has a comparative advantage in cotton. d. Country A has an absolute advantage in cotton. e. Country B has an absolute advantage in cotton.arrow_forwardUsing 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 3arrow_forward
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