Macroeconomics (6th Edition)
6th Edition
ISBN: 9780134106229
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 7, Problem 7.2.5PA
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Currently, Tomczakistan is closed to international trade and producing at the grey point (star symbol) labeled A on the graph. Suppose that
Tomczakistan is going to trade with Leightvania, a country that is relatively rich in labor and was also previously closed to international trade.
On the following graph, use the green point (triangle symbol) to indicate which way Tomczakistan will adjust its production by placing it on one of
the two black points (plus symbol). Dashed droplines will automatically extend to both axes.
(?)
LABOR-INTENSIVE GOODS
10
9
8
SO
01
1
0
0
1
+
2
+
3
+
4
5
6
7
CAPITAL-INTENSIVE GOODS
A
8
Once trade begins, the price of capital in Tomczakistan
9
10
New Production
. In Leightvania, the price of capital
Suppose that each country completely specializes in the production of the good in which it has a comparative advantage, producing only that good. In this case, the country that produces jeans will produce
million pairs per week, and the country that produces corn will produce
million bushels per week.
The table suggests that Italy has an absolute advantage over Romania in (footweat, neither product, both products, beef) and a comparative advantage in (footweat, neither product, both products, beef).
The table suggests that wages in Italy are (the sameas, higher than, lower than) in Romania.
As a result of Romania’s joining the EU, employment in Romania is likely to fall in (the footwear industry, neither industry, both industries, the beef industry) .
True or False: The degree of openness of the Romanian economy will not influence the mix of jobs.
a)True
b)False
Chapter 7 Solutions
Macroeconomics (6th Edition)
Ch. 7 - Prob. 7.1.1RQCh. 7 - Prob. 7.1.2RQCh. 7 - Prob. 7.1.3RQCh. 7 - Prob. 7.1.4PACh. 7 - Prob. 7.1.5PACh. 7 - Prob. 7.1.6PACh. 7 - Prob. 7.1.7PACh. 7 - Prob. 7.2.1RQCh. 7 - Prob. 7.2.2RQCh. 7 - Prob. 7.2.3PA
Ch. 7 - Prob. 7.2.4PACh. 7 - Prob. 7.2.5PACh. 7 - Prob. 7.2.6PACh. 7 - Prob. 7.2.7PACh. 7 - Prob. 7.2.8PACh. 7 - Prob. 7.2.9PACh. 7 - Prob. 7.3.1RQCh. 7 - Prob. 7.3.2RQCh. 7 - Prob. 7.3.3RQCh. 7 - Prob. 7.3.4RQCh. 7 - Prob. 7.3.5PACh. 7 - Prob. 7.3.6PACh. 7 - Prob. 7.3.7PACh. 7 - Prob. 7.3.8PACh. 7 - Prob. 7.3.9PACh. 7 - Prob. 7.3.10PACh. 7 - Prob. 7.3.11PACh. 7 - Prob. 7.3.12PACh. 7 - Prob. 7.3.13PACh. 7 - Prob. 7.4.1RQCh. 7 - Prob. 7.4.2RQCh. 7 - Prob. 7.4.3PACh. 7 - Prob. 7.4.4PACh. 7 - Prob. 7.4.5PACh. 7 - Prob. 7.4.6PACh. 7 - Prob. 7.4.7PACh. 7 - Prob. 7.4.8PACh. 7 - Prob. 7.4.9PACh. 7 - Prob. 7.4.10PACh. 7 - Prob. 7.4.11PACh. 7 - Prob. 7.4.12PACh. 7 - Prob. 7.4.13PACh. 7 - Prob. 7.4.14PACh. 7 - Prob. 7.4.15PACh. 7 - Prob. 7.5.1RQCh. 7 - Prob. 7.5.2RQCh. 7 - Prob. 7.5.3RQCh. 7 - Prob. 7.5.4RQCh. 7 - Prob. 7.5.5PACh. 7 - Prob. 7.5.6PACh. 7 - Prob. 7.5.7PACh. 7 - Prob. 7.5.8PACh. 7 - Prob. 7.5.9PACh. 7 - Prob. 7.5.10PA
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- The table shows the maximum amount of production if all productive capacity in each country is devoted entirely to either of the two products. If each country specializes in its comparative advantage product (you have to figure out that first) and then agrees to trade 2 units of bread for 6 units of cheese, how much will Spain consume? Cheese Bread England 40 10 Spain 10 5arrow_forwardcan you help me rewording this paragraph? Since Ghana and Côte d'Ivoire have similar environment, level of education and institutional background, the imports, and exports from Ghana to Côte d'Ivoire and from Côte d'Ivoire to Ghana is result of intra industry trade. Intra industry trade is the trading of goods within the same industries from one nation to another. So, the trade between these two countries in this case cannot be explained by comparative advantage. It can be explained with economies of scale. Ghana's agricultural exports to Switzerland and Switzerland differ from Ghana in many aspects. Thus, indeed, trade between the two countries can be explained by a comparative advantage. Ghana can grow food at a lower opportunity cost than Switzerland and thus has a competitive advantage over food. In Switzerland, food processing was also rendered at higher opportunity costs. Therefore, by trading with each other, both countries can gain from trade and Ghana can export food to…arrow_forwardPlease see below. Need help with this.arrow_forward
- Refer to Figure 3.6, page 55. Assume that the graph depicts the U.S. domestic market for corn. How many bushels of corn, if any, will the United States export or import at a world price of $1, $2, $3, $4, and $5? Use this information to construct the U.S. export supply curve and import demand curve for corn. Suppose the only other corn-producing nation is France, where the domestic price is $4. Which country will export corn; which will import it?arrow_forwardConsider a small country that exports steel. Suppose the following graph depicts the domestic demand and supply for steel in this country. One of the two price lines represents the world price of steel. Use the following graph to help you answer the questions below. You will not be graded on any changes made to this graph. Price of Steel (Dollars per ton) 100 88 2882 8 20 10 Demand Supply 100 200 300 400 500 600 700 800 900 1000 Quantity of Steel (Tons) Because this country exports steel, the world price is represented by With this export subsidy, the price paid by domestic consumers is $ The quantity of steel consumed by domestic consumers , and the quantity of steel exported O True O False Triangle 8 Suppose that a "pro-trade" government decides to subsidize the export of steel by paying $10 for each ton sold abroad. Under the export subsidy, consumer surplus is $ S As a result, total surplus Polygon ? True or False: With the export subsidy, domestic producers will sell steel to…arrow_forwardSuppose that each country completely specializes in the production of the good in which it has a comparative advantage, producing only that good. In this case, the country that produces pistachios will produce. million pounds per day and the country that produces chinos will produce million pairs per day.arrow_forward
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