The effect on absolute and comparative advantage of two countries A and B if the productive capacity of A rises three times given country A has lowest opportunity cost of producing good X and country B has the lowest opportunity cost of producing good Y.

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Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

Chapter 20, Problem 7P

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The effect on absolute and comparative advantage of two countries A and B if the productive capacity of A rises three times given country A has lowest opportunity cost of producing good X and country B has the lowest opportunity cost of producing good Y.

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If Italy is said to have an absolute advantage over the United States in the production of wheat, this means that, given the same resources, the United States must have a comparative advantage over Italy in the production of wheat. Italy must have an absolute advantage over the United States in producing all goods. the United States must have an absolute advantage in producing some good other than wheat. Italy can produce more wheat than the United States. Italy has an absolute advantage in all goods that are complements to wheat.

Use the following table to answer a)According to the opportunity cost associated with specialization of each product, if both countries decide to trade with each other (no protectionism), which product will England specialize? b)According to the opportunity cost associated with specialization of each product, if both countries decide to trade with each other (no protectionism), which product will Portugal specialize? c)Please calculate the opportunity cost of specializing in one single production (fill in the opportunity cost of each cell below).

Which of the following best explains the concept of "Comparative Advantage" in international trade? a) A country should produce goods in which it has an absolute advantage and trade for those where it does not. b) A country should only export goods and import nothing to maintain a positive trade balance. c) A country should specialize in the production of goods for which it has the lowest opportunity cost compared to other countries. d) A country should diversify its production across various sectors to avoid dependence on a single export commodity.

Answer 2

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Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

Chapter 20, Problem 7P

To determine

To explain:

The effect on absolute and comparative advantage of two countries A and B if the productive capacity of A rises three times given country A has lowest opportunity cost of producing good X and country B has the lowest opportunity cost of producing good Y.

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Answer 3

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Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

Chapter 20, Problem 7P

To determine

To explain:

The effect on absolute and comparative advantage of two countries A and B if the productive capacity of A rises three times given country A has lowest opportunity cost of producing good X and country B has the lowest opportunity cost of producing good Y.

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Answer 4

Question

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

Chapter 20, Problem 7P

To determine

To explain:

The effect on absolute and comparative advantage of two countries A and B if the productive capacity of A rises three times given country A has lowest opportunity cost of producing good X and country B has the lowest opportunity cost of producing good Y.

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Answer 5

Chapter 20, Problem 7P

To determine

To explain:

The effect on absolute and comparative advantage of two countries A and B if the productive capacity of A rises three times given country A has lowest opportunity cost of producing good X and country B has the lowest opportunity cost of producing good Y.

Answer 6

Chapter 20, Problem 7P

To determine

To explain:

The effect on absolute and comparative advantage of two countries A and B if the productive capacity of A rises three times given country A has lowest opportunity cost of producing good X and country B has the lowest opportunity cost of producing good Y.

Answer 7

Chapter 20, Problem 7P

To determine

To explain:

The effect on absolute and comparative advantage of two countries A and B if the productive capacity of A rises three times given country A has lowest opportunity cost of producing good X and country B has the lowest opportunity cost of producing good Y.

Answer 8

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Answer 11

Ch. 20 - Prob. 1P Ch. 20 - Prob. 2P Ch. 20 - Prob. 3P Ch. 20 - Prob. 4P Ch. 20 - Prob. 5P Ch. 20 - Prob. 6P Ch. 20 - Prob. 7P Ch. 20 - Prob. 8P Ch. 20 - Prob. 9P Ch. 20 - Prob. 10P

The effect on absolute and comparative advantage of two countries A and B if the productive capacity of A rises three times given country A has lowest opportunity cost of producing good X and country B has the lowest opportunity cost of producing good Y.

Solution Summary: The author explains the effect on absolute and comparative advantage of two countries A and B if the productive capacity of A rises three times.

Concept explainers

To explain:

The effect on absolute and comparative advantage of two countries A and B if the productive capacity of A rises three times given country A has lowest opportunity cost of producing good X and country B has the lowest opportunity cost of producing good Y.

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Chapter 20 Solutions

The effect on absolute and comparative advantage of two countries A and B if the productive capacity of A rises three times given country A has lowest opportunity cost of producing good X and country B has the lowest opportunity cost of producing good Y.

Solution Summary: The author explains the effect on absolute and comparative advantage of two countries A and B if the productive capacity of A rises three times.

Concept explainers

To explain: The effect on absolute and comparative advantage of two countries A and B if the productive capacity of A rises three times given country A has lowest opportunity cost of producing good X and country B has the lowest opportunity cost of producing good Y.

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Chapter 20 Solutions

To explain:

The effect on absolute and comparative advantage of two countries A and B if the productive capacity of A rises three times given country A has lowest opportunity cost of producing good X and country B has the lowest opportunity cost of producing good Y.