EBK INTERNATIONAL ECONOMICS
7th Edition
ISBN: 9780134523873
Author: Gerber
Publisher: YUZU
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Chapter 4, Problem 3SQ
To determine
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The world has two countries, A and Z, which each produce two products, gadgets and whizbangs. Without
world trade, the domestic price of gadgets in A is lower than the price of gadgets in Z. We can say that
Country Z has a comparative advantage in gadgets and should be exporting
them.
Country Z should specialize in producing gadgets.
Country A has a comparative advantage in gadgets and should be exporting them.
Country A has a comparative advantage in whizbangs and should be importing
them.
In a PPC graph, if free trade makes the budget line become flatter and the comparative advantage good is on the y - axis, what has free trade done to the country's terms of trade?
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? e. In what product should Japan specialize? In what product should Malaysia specialize?
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EBK INTERNATIONAL ECONOMICS
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- If each country specializes in the good in which it has a comparative advantage,....will gain from that trade becausearrow_forwardHome has a comparative advantage in wheat, and Foreign has a comparative advantage in cloth. Once trade occurs, Home produces 1,500 bushels of wheat, and Foreign produces 1,000 yards of cloth. The following table shows the amount of wheat that Home is willing to trade to acquire more cloth. the international price of cloth is 1.5 bushels of wheat per yard, how many bushels of wheat will Home export to Foreign? Select one: a. 550 bushels b. 800 bushels c. 1,050 bushels d. 700 bushelsarrow_forwardCountry X can produce 1,000 units of food and 2,000 units of clothes. Country Y can produce 1,000 units of food and 1,000 units of clothes. In order to maximize trade according to the principles of comparative advantage, country X should produce food and import clothes from country Y. country Y should produce food and import clothes from country X. country X and Y should produce both food and clothes to meet their own needs. country Y should produce both food and clothes, and import additional clothes from country X.arrow_forward
- 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.arrow_forwardSuppose that the United States limits the amount of steel that can be imported from other countries. Using a PPF that puts units of steel on the horizontal axis and units of another good, such as food, on the vertical axis, explain how such a steel import quota will affect production of food and steel in the United States and alter our consumption possibilities. Will the quota make the United States better off as a whole? If not, will it make anyone in the United States better off? Explain. For 19.21, think of the PPF as that of steel produced in the United States and food produced in the United States (and not as total steel available for use in the United States)arrow_forwardThere are two countries in the world, A and B, which trade only two goods, shirts and pants. Under autarky, shirts are cheaper in Country A than in Country B, whereas the pants are more expensive in Country A. Suppose that the world price of shirts lies above the two countries' autarky prices. BothCountry A and Country B will only produce shirts when the opportunity to trade exists.Answer true, false, or uncertain. Please briefly explain your answerarrow_forward
- Choose any two goods. Draw a PPC showing the country producing at a point using all of its resources productively. Label this Point A Label Point B on your diagram, showing a point where there would be unused resources. Would the country choose to produce at Point B? Explain. Label Point C on your diagram, showing a point where this country does not have enough resources to produce this combination of goods. What would have to happen for this country to be able to produce at Point C?arrow_forwardThe table below shows the maximum quantities of two goods that each country can produce. If the countries follow the principle of comparative advantage, which of the following is a potential benefit of trade? Vibranium (tons) Gold (tons) Wakanda 8 tons 2 tons Zamunda 2 tons 1 ton Group of answer choices Trade can allow each country to increase consumption beyond its production possibilities frontier. Trade can allow each country to shift its production possibilities frontier outward to higher levels of production. Trade can allow each country to become less vulnerable to the actions of the other country. All of these answers are correct.arrow_forwardIn Country T, it takes 10 resources to produce 1 ton of cocoa and 13.5 resources to produce 1 ton of rice. In Country Y, it takes 40 resources to produce 1 ton of cocoa and 20 resources to produce 1 ton of rice. Country T has a comparative advantage over Country Y in cocoa. This follows the theory of comparative advantage, and we can say that engaging in free trade benefits all countries that participate in it; however, this conclusion stems from which of these inaccurate assumptions? Multiple Choice We have assumed constant returns to scale. We have assumed the prices of resources and exchange rates in the two countries are dynamic. We have assumed there are barriers to the movement of resources from the production of one good to another within the same country. We have assumed that agrarian nations do not specialize in producing particular products. We have assumed diminishing returns to specialization.arrow_forward
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