When a country has a comparative advantage in the production of a good, it means that it can produce this good at a lower opportunity cost than itstrading partner. Then the country will specialize in the production of this good and trade it for other goods.The following graphs show the production possibilities frontiers (PPFs) for Glacier and Denali. Both countries produce corn and pistachios, each initially(i.e., before specialization and trade) producing 18 million pounds of corn and 9 million pounds of pistachios, as indicated by the grey stars markedwith the letter A.PISTACHIOS (Millions of pounds)48423630241812600PPF6GlacierA12 18 24 3036CORN (Millions of pounds)4248?PISTACHIOS (Millions of pounds)48423630241812600PPF+6Denali1218 24 30 36CORN (Millions of pounds)4248 Glacier has a comparative advantage in the production ofproduction ofSuppose that Glacier and Denali specializecomparative advantage. After specialization, the two countries can produce a total ofof corn..while Denali has a comparative advantage in thein the production of the goods in which each has amillion pounds of pistachios andImillion pounds

Opportunity cost is the cost of producing one good in terms of other. Opportunity cost shows the…

Glacier has a comparative advantage in the production of production of . Suppose that Glacier and Denali specialize comparative advantage. After specialization, the two countries can produce a total of of corn. , while Denali has a comparative advantage in the in the production of the goods in which each has a million pounds of pistachios and million pounds

Glacier has a comparative advantage in the production of production of . Suppose that Glacier and Denali specialize comparative advantage. After specialization, the two countries can produce a total of of corn. , while Denali has a comparative advantage in the in the production of the goods in which each has a million pounds of pistachios and million pounds

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The concept of comparative advantage is used by both countries and companies. Use a two goods example and two countries or companies to explain the comparative advantage theory. Use this theory to justify if its worthwhile for countries or companies specialize.
Suppose that each country completely specializes in the production of the good in which it has a comparative advantage, producing only that good. In this case, the country that produces pistachios will produce. million pounds per day and the country that produces chinos will produce million pairs per day.
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Suppose that Slovenia and Wales both produce olive oil and broccoli. Slovenia's opportunity cost of producing a bushel of broccoli is 4 crates of olive oil while Wales's opportunity cost of producing a bushel of broccoli is 12 crates of olive oil. By comparing the opportunity cost of producing broccoli in the two countries, you can tell that production of broccoli and has a comparative advantage in the production of olive oil. has a comparative advantage in the Suppose that Slovenia and Wales consider trading broccoli and olive oil with each other. Slovenia can gain from specialization and trade as long as it receives more than of olive oil for each bushel of broccoli it exports to Wales. Similarly, Wales can gain from trade as long as it of broccoli for each crate of olive oil it exports to Slovenia. receives more than Based on your answer to the last question, which of the following prices of trade (that is, price of broccoli in terms of olive oil) would allow both Wales and Slovenia…
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In Bangladesh, it takes 300 labor hours to produce one TV set and 5 hours of labor to produce one unit of textiles. The unit labor costs for the same goods in the U.S. are 100 labor hours to produce one TV and 2 labor hour to produce one unit of textiles. Tv Textiles 100 2 Bangladesh 300 5 U.S. Which country has an absolute advantage in the production of textiles? Which country has a comparative advantage in textiles? The * has an absolute advantage in the production of textiles as its unit labor costs are * than that of Bangladesh. The opportunity cost of textiles in the U.S is and in Bangladesh is * has a comparative advantage in textiles. Determine the range of international relative price of TV sets with respect to textiles. The range for the international relative price of the TV sets with respect to textiles is and
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