Microeconomics (7th Edition)
7th Edition
ISBN: 9780134737508
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 2, Problem 2.2.12PA
To determine
Impact of decreasing transportation cost.
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Jefferson
Franklin
1 wheat 1/2 cotton
The table above shows the number of hours required to produce one
bushel of cotton and one bushel of wheat for Jefferson and Franklin. If
each person specializes according to his comparative advantage(s), a
mutually beneficial price ratio would be
=
1 wheat= 2/3 cotton
1 wheat = 0.4 cotton
Cotton (per bushel)
10 hours
12 hours
1 wheat 1/3 cotton
=
Wheat (per bushel)
5 hours
4 hours
ra
Which of the following is not true about the differences between comparative advantage and
absolute advantages?
While it is possible to achieve gains from trade if the country does not have a comparative advantage in the
production of any goods, it is not possible to achieve gains from trade if the country does not have an
absolute advantage in the production of any goods.
Comparative advantage emphasizes the relative cost differences based on opportunity costs, while absolute
advantage emphasizes absolute costs.
In order to achieve gains from trade, specialization should be based on comparative advantage and
not absolute advantage.
In the two nation, two good model, we will always see that a country will have a comparative advantage in
at least one good.
If a country opens up for trade, and it ends up importing a good,
the net effect of importing that good will be a gain for the economy.
the country could end up having a net gain or loss from importing that good, depending on how elastic the
curves are.
the net effect of importing that good will be a loss for the economy.
the country will have to export some other good in order to compensate for the losses incurred by importing
this good.
Chapter 2 Solutions
Microeconomics (7th Edition)
Ch. 2 - Prob. 1TCCh. 2 - Prob. 2TCCh. 2 - Prob. 2.1.1RQCh. 2 - Prob. 2.1.2RQCh. 2 - Prob. 2.1.3RQCh. 2 - Prob. 2.1.4PACh. 2 - Prob. 2.1.5PACh. 2 - Prob. 2.1.6PACh. 2 - Prob. 2.1.7PACh. 2 - Prob. 2.1.8PA
Ch. 2 - Prob. 2.1.9PACh. 2 - Prob. 2.1.10PACh. 2 - Prob. 2.1.11PACh. 2 - Prob. 2.1.12PACh. 2 - Prob. 2.1.13PACh. 2 - Prob. 2.1.14PACh. 2 - Prob. 2.2.1RQCh. 2 - Prob. 2.2.2RQCh. 2 - Prob. 2.2.3PACh. 2 - Prob. 2.2.4PACh. 2 - Prob. 2.2.5PACh. 2 - Prob. 2.2.6PACh. 2 - Prob. 2.2.7PACh. 2 - Prob. 2.2.8PACh. 2 - Prob. 2.2.9PACh. 2 - Prob. 2.2.10PACh. 2 - Prob. 2.2.11PACh. 2 - Prob. 2.2.12PACh. 2 - Prob. 2.2.13PACh. 2 - Prob. 2.2.14PACh. 2 - Prob. 2.2.15PACh. 2 - Prob. 2.3.1RQCh. 2 - Prob. 2.3.2RQCh. 2 - Prob. 2.3.3RQCh. 2 - Prob. 2.3.4RQCh. 2 - Prob. 2.3.5RQCh. 2 - Prob. 2.3.6RQCh. 2 - Prob. 2.3.7PACh. 2 - Prob. 2.3.8PACh. 2 - Prob. 2.3.9PACh. 2 - Prob. 2.3.10PACh. 2 - Prob. 2.3.11PACh. 2 - Prob. 2.3.12PACh. 2 - Prob. 2.3.13PACh. 2 - Prob. 2.3.14PACh. 2 - Prob. 2.3.15PACh. 2 - Prob. 2.3.16PA
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