Macroeconomics: Principles, Problems, & Policies
20th Edition
ISBN: 9780077660772
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 1, Problem 10DQ
To determine
Total savings of goods due to imports.
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Once again, consider Babs and Donna, who can each produce cake, beer, or some combination of
the two using only 40 hours of labor each. Babs can produce a maximum of 50 cakes if she
produces no beer, and 100 units of beer if she produces no cake. Donna can produce a maximum
of 100 cakes with no beer produced; if she makes no cake, she can produce 120 units of beer.
has the comparative advantage in cake production;
has the comparative
advantage in beer production.
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Consider the Production Possibility Frontiers of two countries, Australia and Brazil. Assume both have linear PPFs and the two countries both produce the same two goods: fruits and grain.
Given its resources, Australia can produce either 2 units of grain per day or 1 unit of fruits; Brazil can produce either 5 units of grain or 4 units of fruits. (You may, for your own use, find it helpful to draw the Production Possibilities Frontiers for each country, though these won't be included in the answers you provide in you online responses.)
a. If there were no trade, what would be the local price of fruits in each country, measured in units of grain?
b. If trade is allowed, which country will export fruits and which country will export grain (if any)?
c. What are the gains from trading a unit of fruit if the international price of fruit is equal to the average of the local prices in the two countries?
d. How are the gains from trade distributed? Comment…
12. Suppose that, on the basis of a nation’s production possibilities curve, an economy must sacrifice 10,000 pizzas domestically to get the 1 additional industrial robot it desires but that it can get the robot from another country in exchange for 9000 pizzas. Relate this information to the following statement: “Through international specialization and trade, a nation can reduce its opportunity cost of obtaining goods and thus ‘move outside its production possibilities curve.
Chapter 1 Solutions
Macroeconomics: Principles, Problems, & Policies
Ch. 1.2 - Prob. 1QQCh. 1.2 - Prob. 2QQCh. 1.2 - Prob. 3QQCh. 1.2 - Prob. 4QQCh. 1.A - Briefly explain the use of graphs as a way to...Ch. 1.A - Prob. 2ADQCh. 1.A - Prob. 3ADQCh. 1.A - Prob. 1ARQCh. 1.A - Prob. 2ARQCh. 1.A - Prob. 2ARQ
Ch. 1.A - Prob. 1APCh. 1.A - Prob. 2APCh. 1.A - Prob. 3APCh. 1.A - Prob. 4APCh. 1.A - Prob. 5APCh. 1.A - Prob. 6APCh. 1.A - Prob. 7APCh. 1.A - Prob. 7APCh. 1.A - Prob. 8APCh. 1.A - Prob. 8APCh. 1 - Prob. 1DQCh. 1 - Prob. 2DQCh. 1 - Prob. 3DQCh. 1 - Prob. 4DQCh. 1 - Prob. 5DQCh. 1 - Prob. 6DQCh. 1 - Prob. 7DQCh. 1 - Prob. 8DQCh. 1 - Prob. 9DQCh. 1 - Prob. 10DQCh. 1 - Prob. 11DQCh. 1 - Prob. 1RQCh. 1 - Prob. 2RQCh. 1 - Prob. 3RQCh. 1 - Prob. 4RQCh. 1 - Prob. 5RQCh. 1 - Prob. 6RQCh. 1 - Prob. 7RQCh. 1 - Prob. 1PCh. 1 - Prob. 2PCh. 1 - Prob. 3PCh. 1 - Prob. 4PCh. 1 - Prob. 5PCh. 1 - Prob. 6PCh. 1 - Prob. 7PCh. 1 - Prob. 8P
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