MACROECONOMICS
14th Edition
ISBN: 9781337794985
Author: Baumol
Publisher: CENGAGE L
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Chapter 18, Problem 2DQ
To determine
To describe:The mistake that could arise with the given argument.
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When Oz land closes off to trade, it notices that the number of firms in an industry double in size. What economic theory would help us explain this phenomenon?
In 2005, manufacturing workers in the United States earned an average wage of $23.65 per hour. That same year, manufacturing workers in Mexico earned an average wage of $2.63 per hour. How can U.S. manufacturers possibly compete? Why isn’t all manufacturing done in Mexico and other low-wage countries?
Explain why trade Is Important.
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- Why is the theory of absolute advantage incapable of explaining trade in the real world? Explain.arrow_forwardIf a country closes off to trade and notices that the number of firms in an industry doubles in size, what economic theory would help us explain this phenomenon? A. Stolper-Samuelson. B. Melitz. C. Ricardian. D. Cournot.arrow_forwardSince Russia invaded Ukraine last year many sanctions have been imposed on Russia. Suppose the sanctions involve a ban on all trade with Russia. In purely economic terms, what are the effects of such a ban? Who wins? Who loses?.arrow_forward
- When Ozland closes off to trade, it notices that the number of firms in an industry doubles in size. What economic theory would help us explain this phenomenon? Stolper-Samuelson. Melitz. Ricardian. Cournot.arrow_forwardWhat are the disadvantages and advantages of free trade?arrow_forwardSuppose that Georgiania was a thriving empire in its golden age. Business was booming and it was the center of international trade under the leadership of Emperor Raphael III. His empire's pride and joy was the trading of green and black tea, and he decreed that their entire economy should be built around it. However, in the mid 1800s, Georgiania experienced a severe economic downturn when the other nations of the world created an embargo on tea from Georgiania, which led to civil strife due to thousands of workers being laid off. A downward fluctuation in the economy like this is known as economic growth. a recession. the invisible hand. market failure. The correct term is a key component of macroeconomics. both microeconomics and macroeconomics. microeconomics.arrow_forward
- In 2013, manufacturing workers in the United States earned average compensation of $36.34 per hour. That same year, manufacturing workers in Mexico earned average compensation of $6.82 per hour. How can U.S. manufacturers possibly compete? Why isn’t all manufacturing done in Mexico and other lowwage countries?arrow_forwardMelitz explains that under free tradearrow_forwardPlease use the theory of comparative advantage to explain how international trade between two countries will be beneficialarrow_forward
- Explain the difference between absolute and comparative advantage in relation to trade and give an example of each. How does the type of advantage influence trade between different countries? Why is trade beneficial? What happens if a government imposes tariffs on imported products?arrow_forwardWhy is comparative advantage important in determining trade instead of absolute advantage?arrow_forwardHow does specialization increase production?arrow_forward
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