Figure 1 CJ Slope = -(PAP) Slope =-(PAP)" U Jk 0 Based on Figure 1 above, Nation J should import product C as much as Jc Jk Jp Jk Jc Jp J* Jp

Are differences in geography behind the differences in absolute advantages?

How does protectionism affect the price of the protected good in the domestic market?

Suppose we extend the circular flow model to add imports and exports. Copy the circular flow diagram onto a sheet of paper and then add a foreign county as a third agent. Draw a rough sketch of the flows of imports, exports, and the payment for each on your diagram.

France and Tunisia both have Mediterranean climates that are excellent for producing/harvesting green beans and tomatoes. In France it takes two hours for each worker to harvest green beans and two hours to harvest a tomato. Tunisian workers need only one hour to harvest the tomatoes but four hours to harvest green beans. Assume there are only two workers, one in each country, and each works 40 hours a week. Draw a production possibilities frontier for each country. Hint: Remember the production possibility frontier is the maximum that all workers can produce at a unit of time which, in this problem, is a week. Identify which country has the absolute advantage in green beans and which country has the absolute advantage in tomatoes. Identity which country has the comparative advantage. How much would France have to give up In terms of tomatoes to gain from trade? How much would it have to give up in terms of green beans?

How can governments identify good candidates for infant industry protection? Can you suggest some key characteristics of good candidates? Why are Industries like computers not good candidates for infant industry protection?

Why might Belgium, France, Italy, and Sweden have a higher export to GDP ratio than the United States?

Are the gains from international trade more likely to be relatively more important to large or small countries?

In Germany it takes three workers to make one television and four workers to make one video camera. In Poland It takes six workers to make one television and 12 workers to make one video camera. Who has the absolute advantage in the production of televisions? Who has the absolute advantage in the production of video cameras? How can you tell? Calculate the opportunity cost of producing one additional television set in Germany and In Poland. (Your calculation may involve fractions, which Is tine.) Which country has a comparative advantage in the production of televisions? Calculate the opportunity cost of producing one video camera in Germany and in Poland. Which country has a comparative advantage in the production of video cameras? In this example, is absolute advantage the same as comparative advantage, or not? In what product should Germany specialize? In what product should Poland specialize?

Does intra-industry trade contradict the theory of comparative advantage?