To Explain:
Despite the absence of
Concept Introduction:
Explanation of Solution
Comparative advantage is not the only basis of trade. There could be other reasons for which trade can take place between two countries. These include decreasing costs or increasing returns, difference in tastes or demand, economies of scale and technological changes. Therefore, even when two countries do not have comparative advantage based on any of the stated reasons, opportunities for trade can arise and they may experience gain from trade.
Want to see more full solutions like this?
Chapter 19 Solutions
ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
- b. Kelen and Chris produce rice and wheat. In an hour, Kelen can produce 1 unit of wheat or one unit of rice, while Chris can produce 2 units of wheat and 3 units of rice. They each work 10 hours a day. (8.75) i. Who has an absolute advantage in producing wheat? Who has an absolute advantage in producing rice? Explain. ii. Who has comparative advantage in producing wheat? Who has Comparative advantage in producing rice? Draw a production possibilities frontier for Kelen and Chris assuming that each spends same number of hours each day as the other in producing wheat and rice.arrow_forward7. Japanese labor productivity is roughly the same as that of the United States in the manufacturing sector (higher in some industries, lower in others), while the United States is still considerably more productive in the service sector. But most services are nontraded. Some analysts have argued that this poses a problem for the United States,because our comparative advantage lies in things we cannot sell on world markets.What is wrong with this argument?arrow_forwardQuestion: • How would you explain the idea of comparative advantage to a family or friend who does not study business? • Describe a real-world example of a country/region having a comparative advantage in a good/service.arrow_forward
- Greece and Italy both produce olive oil and cheese. With the same amount of labour Greece produces 15,000 tonnes of cheese per year and 12,000 barrels of olive oil and Italy produces 25,000 tonnes of cheese and 15,000 barrels of olive oil. Determine and explain the comparative advantage for each country. (Show your working)arrow_forwardQUESTION 3 (Figure: The Production Possibilities for Taiwan and Japan) Use Figure: The Production Possibilities for Taiwan and Japan. Taiwan has a comparative advantage in producing. while Japan has a comparative advantage in producing. Quantity of microchips 1,600 1,200 1000 600 400 200 Talwan rain boots; microchips 800 1,200 Quantity of rain boots Quantity of microchips 1,400 Oª O b. both microchips and rain boots; neither good Oo microchips; rain boots i Od. neither good; both microchips and rain boots 1,200 1,000 800 400 400 200 400 Japan 100 1,00 Quantity of rain bootsarrow_forward35. What are some benefits of international free trade? (Easy Question) Multiple Choice . . The U.S. consumer has more purchasing power with their dollars when they visit a store like WalMart or shop online with Amazon, since they get many of their goods from international sources. Lower prices, more consumer choice, more global output and increased wealth. Since the 1980's until today the increase in free trade has helped to lower global poverty. All of these reasons are benefits of international trade.arrow_forward
- 1-2 (4 pts) Trade in a 2-countries 2-goods setup Table 4 Cloth Wine Country A-9000 hrs labor 1 hr/yd 3 hr/bbl 4 hr/bbl Country B - 16000 hrs labor 2 hr/yd 1. Which country has the comparative advantage in producing wine? A. Country A B. Country B I 2. Which country has the comparative advantage in producing cloth? A. Country A B. Country Barrow_forward(Use Table 1) Harold has a comparative advantage in and Wilhelmina has a comparative advantage in Table 1 * Harold Wilhelmina Coconuts Fish Coconuts Fish Output per day 2 1 1 1) fish, fish 2) coconuts, fish 3) coconuts, coconuts 6,arrow_forwardQuestion 3a. What does “term of trade” mean? b. Using the information provided in the table below, answer the following questions. COUNTRY A COUNTRY B TABLES 4 7 DESK 1 2 b) Answer the following questions:i. Which country has the Absolute advantage in tables? ii. Which country has the Absolute advantage in desk? iii. Which country has the Comparative Advantage in tables?iv. Which country has the Comparative advantage in desk? v. If each country has 10 workers who can produce either tables or chairs, draw the PPF of tables and desk for Country A and do the same for Country B.arrow_forward
- 34. To obtain good A in which one does not have a comparative advantage, it is better to acquire it by "indirect production" – producing good B, in which one does have a comparative advantage, and trading it for good A. True False Falsearrow_forwardAre differences in geography behind the differences in absolute advantages?arrow_forwardAt one point Canadas GDP was 1,800 billion and its exports were 542 billion. What was Canadas export ratio at this time?arrow_forward
- Brief Principles of Macroeconomics (MindTap Cours...EconomicsISBN:9781337091985Author:N. Gregory MankiwPublisher:Cengage Learning
- Essentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage LearningPrinciples of Economics 2eEconomicsISBN:9781947172364Author:Steven A. Greenlaw; David ShapiroPublisher:OpenStaxPrinciples of Economics, 7th Edition (MindTap Cou...EconomicsISBN:9781285165875Author:N. Gregory MankiwPublisher:Cengage Learning