ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
4th Edition
ISBN: 9781285423548
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 2, Problem 2.3PA
(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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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.
Question 1
Suppose that Country A and Country B have unit labour requirements for producing one tonne of steel and one tonne of oil shown in the following table:
(Look at the image)
(a) Determine which country has a comparative advantage in each good.(b) If Country A and Country B each have 100 units of labour, calculate the maximum production of each good for both countries
(c) In the absence of trade, Country B uses 20% of its total labour units to produce steel and the rest to produce oil. Country A uses 60% of its total labour units to produce steel and the rest to produce oil. Calculate how many tonnes of steel and oil can be produced by both countries. (d) Both countries agree that one tonne of steel can be exchanged for one tonne of oil. Calculate the gains after trade is allowed if Country A consumes 30 tonnes of oil domestically.
Chapter 2 Solutions
ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
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