Econ Micro (book Only)
6th Edition
ISBN: 9781337408066
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 2, Problem 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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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?
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.
2. Comparative and absolute advantage
David and Morgan are farmers. Each one owns an 18-acre plot of land. The following table shows the amount of zucchini and watermelon each farmer
can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing zucchini or watermelon or to produce zucchini on
some of the land and watermelon on the rest.
David
Morgan
WATERMELON (Pounds)
180
162
On the following graph, use the blue line (circle symbol) to plot David's production possibilities frontier (PPF), and use the purple line (diamond
symbol) to plot Morgan's PPF.
144
126
108
90
72
54
36
1.8
0
Zucchini
(Pounds per acre)
28
0
zucchini.
18
90 180
Watermelon
(Pounds per acre)
7
6
270
360 450 540 630 720 810 900
ZUCCHINI (Pounds)
David's opportunity cost of producing 1 pound of watermelon is
pound of watermelon is
David's PPF
Morgan's PPF
has an absolute advantage in the production of zucchini, and
has an absolute advantage in the production of watermelon.
pounds of…
Chapter 2 Solutions
Econ Micro (book Only)
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