Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 3, Problem 6CQQ
To determine
The
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An average worker in Brazil can produce an ounce of soybeans in 20 minutes and an ounce of coffee in 60 minutes, while an average worker in Peru can produce an ounce of soybeans in 50 minutes and an ounce of coffee in 75 minutes.a. Who has the absolute advantage in coffee? Explain.b. Who has the comparative advantage in cof-fee? Explain.c. If the two countries specialize and trade with each other, who will import coffee? Explain.d. Assume that the two countries trade and that the country importing coffee trades 2 ounces of soybeans for 1 ounce of coffee. Explain why both countries will benefit from this trade.
Debra can make either 12 cakes or 16 cookies in 4 hours. Sam can make either 6 cakes or 12 cookies in 4 hours.c. If both Debra and Sam concentrate on producing only the product in which they havea comparative advantage, how many cakes and how many cookies will they produce?
Points on Production Possibilities Frontier
Canada
China
Wheat
Computers
Wheat
Computers
A
150
0
90
0
B
100
25
60
60
C
50
50
30
120
D
0
75
0
180
Draw the production possibilities graph for Canada and China and label all of the points on the graph.
For which good does Canada have a comparative advantage?
For which good does China have a comparative advantage?
If Canada and China decide to specialize and trade, how many more computers and bushels of wheat would be available for consumption by both countries? Show the increase on your graphs.
Canada and China decide to impose trade restrictions in the form of a tariff on the computers and wheat. What are the costs or benefits to the consumer, producer and government for each country?
Chapter 3 Solutions
Essentials of Economics (MindTap Course List)
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- In Japan, one worker can make 5 tons of rubber or 80 radios. In Malaysia, one worker can make 10 tons of rubber or 40 radios. Who has the absolute advantage in the production of rubber or radios? How can you tell? Calculate the opportunity cost of producing 80 additional radios in Japan and in Malaysia. (Your calculation may involve fractions, which is fine,) Which country has a comparative advantage in the production of radios? Calculate the opportunity cost of producing 10 additional tons of rubber in Japan and in Malaysia. Which country has a comparative advantage in producing rubber? In this example, does each country have an absolute advantage and a comparative advantage in the same good? In what product should Japan specialize? In what product should Malaysia specialize?arrow_forwardIf the state of Texas has a lower opportunity cost for producing beef compared to Alaska, then... Group of answer choices Texas has a comparative advantage in beef and should just produce beef for itself and not export to other states like Alaska. Texas has an absolute advantage in beef and should share expertise with Alaska so they can develop an absolute advantage as well. Texas has a comparative advantage in beef, and Alaska should purchase beef from Texas. Texas has an absolute advantage in beef, and Alaska should purchase beef from Texas.arrow_forwardA typical Australian farmer can produce 8000 lbs of wheat or 500 lbs of potatoes per year. A typical Canadian farmer can produce 5000 lbs of wheat or 400 lbs of potatoes per year. Who has the comparative advantage in producing potatoes? a. Canada b. Australiaarrow_forward
- Suppose that two countries can both produce cars and cotton. The opportunity cost of a car in Country A is 50 units of cotton and the opportunity cost of a car in country B is 300 units of cotton. In this example a. None of these. b. Country A has a comparative advantage in cotton. c. Country B has a comparative advantage in cotton. d. Country A has an absolute advantage in cotton. e. Country B has an absolute advantage in cotton.arrow_forwardSean and Yvette are farmers. Each one owns a 12-acre plot of land. The following table shows the amount of alfalfa and barley each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing alfalfa or barley or to produce alfalfa on some of the land and barley on the rest. Sean Yvette BARLEY (Bushels) On the following graph, use the blue line (circle symbol) to plot Sean's production possibilities frontier (PPF), and use the purple line (diamond symbol) to plot Yvette's PPF. 120 108 96 84 72 60 48 36 24 12 0 0 Alfalfa Barley (Bushels per acre) (Bushels per acre) 18 6 28 7 60 120 180 240 300 380 420 480 540 600 ALFALFA (Bushels) Sean's PPF Yvette's PPF (?)arrow_forwardEngland and Scotland both produce scones and sweaters. Suppose that an English works can produce 50 scones per hour or 1 sweater per hour. Suppose that a Scottish worker can produce 40 scones per hour or 2 sweaters per hour. a. Which country has the absolute advantage in the production of each good? Which country has the comparative advantage? b. If England and Scotland decide to trade, which commodity will Scotland trade to England? Explain. c. If a Scottish worker could produce only 1 sweater per hour, would Scotland still gain from trade? Would England still gain from trade? Explain.arrow_forward
- Suppose that one day of labor in each country produces the following quantities of fish and cheese: 1. Does France have a comparative advantage in the production of fish, cheese, or neither? Explain. 2. Does Japan have a comparative advantage in the production of fish, cheese, or neithter? Explain. 3. Suppose the countries decide to trade with each other—1 ton of cheese for 3 tons of fish. Would this trade be advantageous to both countries? Explain. Country Fish (tons) Cheese (tons) France 80 40 Japan 200 50arrow_forwardFigure 3-3 Ice cream and cones are measured in kilograms. Cones Ice Cream Cones Jerry Ice Cream Refer to Figure 3-3. What does each of the two producers have a comparative or absolute advantage in? a. Ben has an absolute advantage in neither good, and Jerry has a comparative advantage in ice cream. .b. Ben has an absolute advantage in ice cream, and Jerry has a comparative advantage in cones. X c. Ben has an absolute advantage in cones, and Jerry has a comparative advantage in ice cream. d. Ben has an absolute advantage in both goods, and Jerry has a comparative advantage in cones.arrow_forwardUsing the numbers in the table, determine which country has a comparative advantage in producing each product. Output per Hour of Work Switzerland Canada Smartphones 8 5 Which of the following statements is true? A. The opportunity cost for Canada to produce one Smartphone is 0.60 Fitness Bracelet. B. The opportunity cost for Switzerland to produce one Fitness Bracelet is 1.25 Smartphones. OC. The opportunity cost for Switzerland to produce one Smartphone is 0.80 Fitness Bracelet. OD. The opportunity for Canada to produce one Smartphone is 1.67 Fitness Bracelets. Fitness Bracelets 10 3arrow_forward
- 8. An average worker in Brazil can produce an ounce of soybeans in 20 minutes and an ounce of coffee in 60 minutes, while an average worker in Peru can produce an ounce of soybeans in 50 minutes and an ounce of coffee in 75 minutes. a. Who has the absolute advantage in coffee? Explain. b. Who has the comparative advantage in coffee? Explain. c. If the two countries specialize and trade with each other, who will import coffee? Explain. d. Assume that the two countries trade and that the country importing coffee trades 2 ounces of soybeans for 1 ounce of coffee. Explain why both countries will benefit from this tradearrow_forward1. Determine which country has a comparative advantage in each good. 2. If Country A and Country B each have 100 units of labour, calculate the maximum production of each good for both countries. 3. 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. 4. 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.arrow_forwardCountry A Country B Tables 26 8 Chairs 2 Answer the following questions: i. Which country has the Absolute advantage in tables? Which country has the. osol advantage chairs? ii. Which country has the Comparative advantage in tables? iv. Which country has the Comparative advantage in chairs? V. If each country has 10 workers who can produce either tables or chairs, draw the PPF of tables and chairs for Country A and do the same for Country B.arrow_forward
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