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ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Question 25
Economists favor free trade based on the theory of comparative/absolute advantage, which recommends specialization and trade to increase world output. Are there real-life problems with this theory?
O a. Yes. Countries may not want to depend on others for important items.
O b. No. This theory means we miss out on the benefits of trade wars, which is a big loss.
Oc Both "yes" answers are correct.
Od. Yes. Specialization can be risky, so diversification may be safer.
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Question 25
Economists favor free trade based on the theory of comparative/absolute advantage, which recommends specialization and trade to increase world output. Are there real-life problems with this theory?
O a. Yes. Countries may not want to depend on others for important items.
O b. No. This theory means we miss out on the benefits of trade wars, which is a big loss.
Oc Both "yes" answers are correct.
Od. Yes. Specialization can be risky, so diversification may be safer.
Moving to another question will save this response.
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489
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- 5. Free-trade benefits In addition to the positive welfare effects that free trade has on an economy, there are a variety of other benefits of international trade. Consider the following scenario: Because of international trade, poorer countries are able to learn about technological advances made by other countries rather than investing scarce resources in developing advanced technology themselves. The previous scenario represents which of the following benefits of free trade? O Increased variety of goods O Increased competition O Lower costs through economies-of scale O An enhanced flow of ideasarrow_forwardIf China can produce cars at a lower cost than America using all Chinese-made parts, it has a comparative advantage rather than an absolute advantage. O True Falsearrow_forwardNeed helparrow_forward
- Table 3-5 England Spain Labour hours needed to make one unit: Cheese 1 Select one: O a. consumers who like bread O b. owners of cheese-producing companies Bread 2 8 O c. consumers who like cheese O d. owners of milk-producing companies Amount produced in 40 hours: Cheese Refer to Table 3-5. If England and Spain specialize and trade according to their respective comparative advantage, who gains in the short run in England? 40 20 Bread 20 5arrow_forwardThe theory of comparative advantage: O a. Claims that economic well-being is enhanced if each country's citizens produce only a single product. Ob. Claims that economic well-being is enhanced when all countries compare commodity prices after adjusting for exchange rate differences in order to standardize the prices charged by all countries. O. Claims that economic well-being is enhanced if each country's citizens produce that which they have a comparative advantage in producing relative to the citizens of other countries, and then trade production. O d. Claims that no country has an absolute advantage over another country in the production of any good or service.arrow_forwardPlease answer this for me. Thanksarrow_forward
- Suppose that opportunity costs are constant in both France and Italy. In France, maximum feasible hourly production levels are either 3 units of wheat or 5 units of wine. In Italy, maximum feasible hourly production levels are either 4 units of wheat or 10 units of wine. It is correct to state that A. Italy has a comparative advantage in producing wine. B. France has a comparative advantage in producing both wheat and wine. C. Italy has a comparative advantage in producing both wheat and wine. D. France has a comparative advantage in producing wine.arrow_forwardIf Switzerland can produce chocolate at a lower relative cost than Belgium, what kind of advantage does Switzerland have? O a comparative advantage O an absolute advantage a resource advantage a production advantagearrow_forwardQUESTION 13 wine 90 8888888 80 70 60 50 40 30 20 PPF Portugal 1 CPF 10. 0 0 10 20 30 40 50 60 cloth wine 90 80 70 60 50 40 30 20 10 England 1 PPF CPF 0 0 10 20 30 40 50 60 cloth 13. According to the above set of production possibilities and consumption (trade) possibilities frontiers, what will happen to production and relative prices once trade is opened between these two countries? O a) Production of cloth in Portugal will fall to zero, while the price of wine will fall to ½ yd/bottle. b) Production of cloth in England will fall to zero, while the price of wine will increase to ½ yd/bottle. c) Production of wine in Portugal will increase to 90, while the price of cloth will fall to 2 yd/bottle. d) Production of wine in England will increase to 60, while the price of cloth will fall to 3 bottles/yd.arrow_forward
- Candonia has a comparative advantage in the production of , while Desonia has a comparative advantage in the production of . Suppose that Candonia and Desonia specialize in the production of the goods in which each has a comparative advantage. After specialization, the two countries can produce a total ofarrow_forwardHelparrow_forwardWhat were some of the reasons for the decline in the import-substituting industrialization strategy in favor of a strategy that promotes open trade? O High rates of effective protection allowed industries to survive when their cost of production was three to four times higher than the price of the imports they replaced. O Protectionist policies had a negative effect on incentives, which led to rent-seeking or corruption in some developing countries. O Countries pursuing import substitution were not catching up with advanced countries. O All of the above.arrow_forward
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