The confusion between absolute and comparative advantages .

Question

Want to see the full answer?

Answer 1

Question

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

Chapter 7, Problem 7.3.6PA

To determine

The confusion between absolute and comparative advantages.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Suppose that a tailor in Cottonland can sew either 40 cotton shirts or 10 silk shirts per week, and a tailor in Silkland can sew either 18 cotton shirts or 6 silk shirts per week. There are 20 tailors in Cottonland and 20 tailors is Silkland. Answer the following questions: 2.1. What country has the absolute advantage in sewing cotton shirts? What country has the absolute advantage in sewing silk shirts? 2.2. What country has the comparative advantage in sewing cotton shirts? What country has the comparative advantage in sewing silk shirts? Numerically 2.3. If the two countries specialize and produce according to the comparative advantage criterion, how much in terms of cotton and silk shirts each country will produce per week? Fill in the table below with your calculations. Cotton shirts/per week Silk shirts/per week Cottonland Silkland

David Ricardo, the British political economist, used the example of two commodities—wine and cloth—produced by England and Portugal to explain trade. The following table shows the number of labor hours it would take England and Portugal to produce one unit each of wine and cloth: (see table attatched) Portugal can produce both wine and cloth using fewer labor hours than England uses. A group of mercantilists (who believe that nations build their wealth by exporting more than they import) suggest that Portugal has nothing to gain from trading with England. Would you agree? Explain your answer.

Consider the trading bloc – CARICOM. Discuss three economic motivations for the group of countries in this trading bloc to form an agreement. Do you think the countries in CARICOM are likely to have cross-cultural similarities or differences? Briefly explain you answer.

Answer 2

Question

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

Chapter 7, Problem 7.3.6PA

To determine

The confusion between absolute and comparative advantages.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

Chapter 7, Problem 7.3.6PA

To determine

The confusion between absolute and comparative advantages.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

Chapter 7, Problem 7.3.6PA

To determine