Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 19, Problem 7E
a)
To determine
The reason for the trade.
b)
To determine
The effect of southern innovation in north.
c)
To determine
The case of free trade.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Y
100
Country A
X
Y
40
Country B
40
X
20
a) How much of Good Y will Country B produce if they specialize in their comparative advantage? 40
b) By themselves, if Country B produces 18 units of Y, what is the maximum amount they could produce of Good X? 18
c) If the terms of trade proposed are 5 X for 10Y, how much will Country B be able to consume of Good Y after trade if they specialize in
their comparative advantage before trading? 40
Suppose there are two countries Peru and Japan that produce Food and Fuel. Peru can produce 7,523 units of Food or 17,853 units of Fuel using a labour force of 8000. Japan can produce 5,733 units of Food or 24,156 units of Fuel using a labour force of 5000.
(g) If the terms of trade is 2 to 1 in favour of the country with the comparative advantage in food. Determine the combination of the two goods that each country will consume after trade if the country with the comparative advantage in fuel imports 4000 units of food. Label this point B and B* respectively.
h) Who gains from trade? Who loses? What is the impact if any on the world?
(i) What should the terms of trade be to make trade beneficial for BOTH Japan and Peru? Explain.
Analyze the following (2x2) matrix.
Identify the countries having certain advantages.
Moreover, specify the benefits of trade for both countries.
Matrix A
Wheat (bushels/labor hour )
Cloth (yards/labor hour)
United States
6
4
U.K.
1
3
(Numerical values reflect output per unit of input)
Will trade occur? Identify the country having the absolute advantage in wheat and the one having the absolute advantage in cloth.
Identify the production possibility frontiers for both countries.
Show the gains of trade if we assume that the U.S. exchanges 6 units of wheat for 6 units of cloth.
Chapter 19 Solutions
Macroeconomics (Fourth Edition)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- home cheese alc=1hr/kg wine alw=2hrs/gallon foreign cheese alc*=6hrs/kg wine alw*=3hrs/gallon Calculate the Home country's opportunity cost of producing cheese. In which product does the Home (Foreign* ) country has an absolute advantage? Show in which product does the Home (Foreign* ) country has comparative advantage? Calculate the relative supply (RS) With trade, what is the equilibrium range that the relative price of cheese to wine will settle? Supposing that the intersection of RS and RD occurs at PC /PW = 1, what is the implication?arrow_forwardInternational Trade Suppose the production of chocolate and wine per hour of labor in Italy and France is as follows: Chocolate (C) Wine (W) Italy (I) 8 bars 4 bottles France (F) 6 bars 2 bottles a) Which country has the absolute advantage in chocolate production? Does the same country also have the comparative advantage in chocolate production? Explain your answers. b) Suppose that with free trade the price of one bottle of wine is 2.5 bars of chocolate. Further suppose that 100 million hours of labor are available in both countries. Carefully draw the production possibility curves in each country both with and without free trade. With reference to the graphs, briefly explain in words how free trade can help both countries become better off.arrow_forward# Module Two Quiz 3. Gains from trade Suppose there exist two imaginary countries, Glacier and Sequoia. Their labor forces are each capable of supplying four million hours per day that can be used to produce = pistachios, chinos, or some combination of the two. The following table shows the amount of pistachios or chinos that can be produced by one hour of labor. € Pistachios Chinos Country (Pounds per hour of labor) (Pairs per hour of labor) 24 Glacier Sequoia 32 X 12 8 Suppose that initially Glacier uses 1 million hours of labor day to produce pistachios and 3 million hours per day to produce chinos, while Sequoia uses 3 million hours of lab per day to produce pistachios and 1 million hours per day produce chinos. As a result, Glacier produces 12 million pounds of pistachios and 72 million pairs of chinos, and Sequoia produces 24 million pounds of pistachios and 32 million pairs of chinos. Assume there are no other countrie willing to engage in trade, so, in the absence of trade betw…arrow_forward
- 1-Analyze the following (2x2) matrices. Identify the countries having certain advantages. Moreover, specify the benefits of trade for both countries. A (2x2) matrix involves (2 countries exchanging 2 commodities or products) Matrix A Wheat (bushels/labor Cloth (yards/labor hour) hour) United States U.K. 3. (Numerical values reflect output per unit of input) a. Will trade occur??? Identify the country having the absolute advantage in wheat and the one having the absolute advantage in cloth. b. Identify the production possibility frontiers for both countries. c. Show me the gains of trade if we assume that the U.S. exchanges 6 units of wheat for 6 units of cloth.arrow_forwardIn Country T, it takes 10 resources to produce 1 ton of cocoa and 13.5 resources to produce 1 ton of rice. In Country Y, it takes 40 resources to produce 1 ton of cocoa and 20 resources to produce 1 ton of rice. Country T has a comparative advantage over Country Y in cocoa. This follows the theory of comparative advantage, and we can say that engaging in free trade benefits all countries that participate in it; however, this conclusion stems from which of these inaccurate assumptions? Multiple Choice We have assumed constant returns to scale. We have assumed the prices of resources and exchange rates in the two countries are dynamic. We have assumed there are barriers to the movement of resources from the production of one good to another within the same country. We have assumed that agrarian nations do not specialize in producing particular products. We have assumed diminishing returns to specialization.arrow_forwardSuppose that Country A can produce 6060 bags of sugar or 3030 bags of flour per worker hour. Country B can produce 4040 bags of sugar or 1010 bags of flour per worker hour. Assume that there is 100%100% specialization, and each country has 55 worker hours.If each country specializes in its comparative advantage, calculate the quantity of the good that Country B should produce.arrow_forward
- Assume that country A can use its resources to produce 320 computers or 320,000 books, while country B can produce 16 computers or 32,000 books. Can we determine which country has an absolute advantage in producing computers? Who has the comparative advantage in producing computers? Draw the possibility frontiers for both countries and find their slopes. In the case the two countries trade, which country exports what? Show graphically if country A benefits from trade.arrow_forwardSuppose that there are 10,000 hours of labor available in Canada, and that 15 hours of labor are required to produce one unit of cotton, while 5 hours are required to produce one unit of butter. When trade occurs, the world relative price of cotton (in terms of butter) is 2, and Canada exports 800 units of butter. Find out Canada's imports of cotton would be units. Note: If your answer is an integer, please put in an integer. If your answer is a fraction, please simplify it or convert it to a decimal.arrow_forwardComparative advantage and gains from trade Consider two neighboring island countries called Bellissima and Felicidad. They each have 4 million labor hours available per month that they can use to produce corn, jeans, or a combination of both. The following table shows the amount of corn or jeans that can be produced using 1 hour of labor. Corn Jeans Country (Bushels per hour of labor) (Pairs per hour of labor) Bellissima 8 16 Felicidad 5 20 Initially, suppose Bellissima uses 1 million hours of labor per month to produce corn and 3 million hours per month to produce jeans, while Felicidad uses 3 million hours of labor per month to produce corn and 1 million hours per month to produce jeans. Consequently, Bellissima produces 8 million bushels of corn and 48 million pairs of jeans, and Felicidad produces 15 million bushels of corn and 20 million pairs of jeans. Assume there are no other countries willing to trade goods, so in the absence of trade between…arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning