Macroeconomics (7th Edition)
7th Edition
ISBN: 9780134738314
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 7, Problem 7.2.6PA
To determine
Bolivia’s
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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 (7th Edition)
Ch. 7 - Prob. 7.1.1RQCh. 7 - Prob. 7.1.2RQCh. 7 - Prob. 7.1.3PACh. 7 - Prob. 7.1.4PACh. 7 - Prob. 7.1.5PACh. 7 - Prob. 7.2.1RQCh. 7 - Prob. 7.2.2RQCh. 7 - Prob. 7.2.3PACh. 7 - Prob. 7.2.4PACh. 7 - Prob. 7.2.5PA
Ch. 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. 7.5.1RQCh. 7 - Prob. 7.5.2RQCh. 7 - Prob. 7.5.3RQCh. 7 - Prob. 7.5.4PACh. 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. 7.5.10PACh. 7 - Prob. 7.1CTECh. 7 - Prob. 7.2CTECh. 7 - Prob. 7.3CTE
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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_forwardIf the United States produces 8 automobiles and Canada produces 4 automobiles and the United States produces 8 units of lumber and Canada produces 2 units of lumber, which country has comparative advantage,if any, in producing automobiles?arrow_forwardRefer 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_forward
- Economics Look at the following table comparing U.S. imports from several countries to capital/labor ratio in these countries. Suppose that the capital/labor ratio is 2.5 % in the U.S.. The evidence in the table supports the New Theory of Trade more than the Neoclossical Trade Theory. [Base your answer on the information in the table only] Canada Japan India France Hong Kong Capital/Labor (%) U.S. Imports (Million USD) 100 5.5 2.4 3 3.6 7 20 25 55 150 Agree Disagreearrow_forwardThe following table shows the production of cows’ milk and potatoes per unit of input in the hypothetical countries of St. Claire and St. Paul. Use the following table to answer the questions. St. Claire St. Paul Cow’s Milk 100 liters 50 liters Potatoes 150 liters 60 kilos a) What is the opportunity cost of producing one liter of cows’ milk in St. Paul? b) Which country has the comparative advantage in the production of cows’ milk? c) What is the opportunity cost of producing one kilo of potatoes in St. Claire?arrow_forwardZambia Germany Pair of Shoes per worker Barrel of wines per worker 7. 8. 3. Use the information above to answer following: Which country has absolute advantage in production of shoes ? Which country has absolute advantage in production of wine? Calculate and tell which country has comparative advantage in production of shoes? Calculate and tell which country has comparative advantage in production of wine?arrow_forward
- Suppose that Canada can produce 100,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek, while Germany can produce 90,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek. From these numbers, we can conclude: Question 48 options: Canada has a comparative advantage in the production of hockey sticks. Germany has a comparative advantage in the production of hockey sticks. Canada has an absolute advantage in the production of maple syrup. Germany has an absolute advantage in the production of maple syrup.arrow_forward3. Gains from trade Consider two neighboring island countries called Contente and Euphoria. They each have 4 million labor hours available per month that they can use to produce jeans, corn, or a combination of both. The following table shows the amount of jeans or corn that can be produced using 1 hour of labor. Jeans Corn Country (Pairs per hour of labor) (Bushels per hour of labor) Contente 16 Euphoria 20 Initially, suppose Contente uses 1 million hours of labor per month to produce jeans and 3 million hours per month to produce corn, while Euphoria uses 3 million hours of labor per month to produce jeans and 1 million hours per month to produce corn. Consequently, Contente produces 8 million pairs of jeans and 48 million bushels of corn, and Euphoria produces 15 million pairs of jeans and 20 million bushels of corn. Assume there are no other countries willing to trade goods, so, in the absence of trade between these two countries, each country consumes the amount of jeans and corn…arrow_forwardThe table shows the units of output a worker can produce per hour in Germany and Korea for two different goods: spaetzle and kimchi. Use this table to answer the question. One worker in Germany One worker in Korea Pounds of spaetzle per hour Which of the statements is true? 2 Pounds of kimchi per hour Korea has a comparative advantage in the production of spaetzle, while Germany has a comparative advantage in the production of kimchi. Korea has a comparative advantage in the production of both goods. Germany has a comparative advantage in the production of spaetzle, while Korea has a comparative advantage in the production of kimchi. Germany has a comparative advantage in the production of both goods.arrow_forward
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