EBK INTERNATIONAL ECONOMICS
7th Edition
ISBN: 9780134523866
Author: Gerber
Publisher: YUZU
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Question
Chapter 5, Problem 3SQ
To determine
Explain the difference between the internal and external economies of scale.
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Students have asked these similar questions
What are the disadvantages and advantages of free trade?
How does specialization increase production?
Macmillan Learning
The Power of Trade and Comparative Advantage: Work It Out 5
Here's another specialization and exchange problem. This problem is wholly made-up, so that you won't be able to use your
intuition about the names of countries or the products to figure out the answer.
Consider the following productivity table:
Mandovia
Ducennia
Number of Hours to Make One Rotid
Output of rotids for Mandovia:
Total rotid output:
50
150
Number of Hours to Make One Tauron
d. Now allow specialization. One billion hours of labor are available for making products in Mandovia, and 2 billion hours of
labor are available for making products in Ducennia. If each country completely specializes in the product in which it holds the
comparative advantage, what will the total output of rotids be? Of taurons? Is the total output of each product higher than
before?
million
100
million
200
Output of rotids for Ducennia:
million
Chapter 5 Solutions
EBK INTERNATIONAL ECONOMICS
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Similar questions
- Highlight the basis for trade between two countries with identical production possibility frontiers and different demand conditions.arrow_forwardPresent and explain two arguments that can be used (or are often used) against free trade.arrow_forwardDiscuss scale economies as they apply to trade.arrow_forward
- When Ozland closes off to trade, it notices that the number of firms in an industry doubles in size. What economic theory would help us explain this phenomenon? Stolper-Samuelson. Melitz. Ricardian. Cournot. Explain your answer in up to 200 words and using a diagramarrow_forwardWhich of the following is predicted by the models of intraindustry trade we have studied? Countries will export what they have a relatively low opportunity cost of producing and import what they have a high opportunity cost of producing. Trade will either help consumers or help producers in a given industry but never both. Trade may decrease the price and increase the variety in the same industry for two countries that begin to trade.arrow_forwardWhen Ozland closes off to trade, it notices that the number of firms in an industry double in size. What economic theory would help us explain this phenomenon? Stolper-Samuelson. Melitz. Ricardian. Cournot. please explain answer and a diagramarrow_forward
- Many trading partners trade the same goods and services with one another. The U.S. exports automobiles to Europe and Europe exports automobiles to the United States. In fact, that's true for food, appliances, computers and many other goods. Does intra-industry trade contradict the theory of comparative advantage? Why or why not?arrow_forwardBrazil Mexico Soya per unit of labor 0.05 0.02 Corn per unit of labor 1.25 1.40 At what relative “price” of soya to corn would Mexico receive all of the potential gains from trade with Brazil? If production in both countries occur under conditions of perfect competition, and if the wage rate is $2 per hour in Brazil and $5 per hour in Mexico, using your knowledge of microeconomic theory, how would you go about calculating the price of corn in both countries?arrow_forwardDefine free tradearrow_forward
- When Ozland closes off to trade, it notices that the number of firms in an industry doubles in size. What economic theory would help us explain this phenomenon? Stolper-Samuelson. Melitz. Ricardian. Cournot.arrow_forwardDoes intra-industry trade contradict the theory of comparative advantage?arrow_forwardMelitz explains that under free tradearrow_forward
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