ECON MICRO
5th Edition
ISBN: 9781337000536
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 2, Problem 2.3P
(a)
To determine
The
Concept Introduction:
(b)
To determine
The country that has an absolute advantage in producing wheat and in producing cloth.
Concept Introduction:
Absolute Advantage: The ability of a country to do any economic activity more efficiently than others
Comparative Advantage: The capability of a country to produce the specialized product in which it has a lower opportunity cost
(c)
To determine
The country that has a comparative advantage in producing wheat and in producing cloth.
Concept Introduction:
Absolute Advantage: The ability of a country to do any economic activity more efficiently than others
Comparative Advantage: The capability of a country to produce the specialized product in which it has a lower opportunity cost
(d)
To determine
The country that should specialize in producing wheat and in producing cloth.
Concept Introduction:
Absolute Advantage: The ability of a country to do any economic activity more efficiently than others
Comparative Advantage: The capability of a country to produce the specialized product in which it has a lower opportunity cost
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6
Short Answer (8.0score)
33. The chart below is the prodution cost of US.
and UK.
U.S.
U.K.
Wheat (bushels/labor hour)
6
1
Cloth (yards/labor hour)
4
2
question: (1) explain the comparative advantage
of each nation;
(2) what is the gain from trade if the
two trade for 4 wheat for 4 cloth?
Output per Hour Worked
United States
Mexico
Computers (unit)
3
1
Shoes (pairs)
6
3
Based on the above table, which country or countries has an absolute advantage and a comparative advantage in shoes?
a) Mexico has a comparative advantage, and the United States has an absolute advantage in shoes.
b) Mexico has an absolute and comparative advantage in shoes.
c) The United States has a comparative advantage, and Mexico has an absolute advantage in shoes.
d) The United States has an absolute and comparative advantage in shoes.
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