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- According to the theory of Comparative Advantage, participation in international trade will always leave a country better off. Group of answer choices True FalseThe primary benefit that results when a nation employs its resources in accordance with the principle of comparative advantage is a) an expansion in capital investment resulting from a reallocation of resources away from consumption b) a larger output resulting from a more efficient use of resources c) greater equality of income resulting from an increase in the number of workers d) an increase in the profitability of the business enterprises resulting from an increase in capital formationExplain the concept of comparative advantage and how it leads to gains from international trade.
- Suppose that Cambodia decides to become self-sufficient in bananas and even to export t In order to accomplish this, large tax incentives are granted to companies that will invest in banana production. Soon, the Cambodian industry is competitive and able to sell bananas at the lowest price anywhere. Does Cambodia have a comparative advantage? Why, or why not? What are the consequences for the overall economy?Two countries, Nicaragua and Argentina can both produce bananas and wheat. Their production possibility frontiers are shown below. Based on this we can say that Nicaragua has a comparative advantage in producing__________. Both countries can gain from trade if Nicaragua produces___________ and Argentina produces __________ and trade. Bananas; bananas; wheat. Bananas; wheat; bananas. Wheat; wheat; bananas Wheat, bananas; bananasAmerican worker takes 20 hours to produce one computer and 300 hours to produce an RV. A Japanese worker takes 30 hours to produce one computer and 450 Hours to produce an RV. Which country has a comparative advantage in what product? Why?
- Differentiate between the following terms. Absolute advantage and comparative advantage.Discuss the theory of comparative advantage , highlighting the extent to which the Asian Tigers have benefited from exploiting national advantages and specialization of their countries in a bid to attain a high export drive.Suppose a capital abundant country, such as Canada, enters into free trade with a natural resource rich country, such as India.I. Explain the form of trade, such as, who exports what and imports what, using the concept of comparative advantage in trade theory. Identify each country’s comparative advantage and disadvantage.II. Explain how trade creates winners and losers within each country?Note: You may/may not draw relevant diagrams to answer the above questions.
- Assume that there are two countries, Country A, which earns $5,000 per capita GDP, and Country B, which earns $50,000 per capita GDP. Using Country A and Country B and two products that you choose, thoroughly and clearly explain an example of how these countries can gain from trade pursuant to the doctrine of Comparative Advantage.Finally, Canada and Australia are both English-speaking countries with not-too dissimilar population sizes. However, Canada’s trade is twice as large as that of Australia’s. to what extent, does comparative advantage help explain this?Which of the following best explains the concept of "Comparative Advantage" in international trade? a) A country should produce goods in which it has an absolute advantage and trade for those where it does not. b) A country should only export goods and import nothing to maintain a positive trade balance. c) A country should specialize in the production of goods for which it has the lowest opportunity cost compared to other countries. d) A country should diversify its production across various sectors to avoid dependence on a single export commodity.
