1. (a) Compare and contrast Adam Smith's views on international trade with those of the mercantilists. (b) With illustrations, distinguish between Adam Smith's concept of absolute advantage and David Ricardo's concept of comparative advantage.
Q: 5. The price of trade Suppose that France and Denmark both produce beer and stained glass. France's…
A: The opportunity cost of a choice is the value of the best alternative forgone where, given limited…
Q: 6. Terms of trade Suppose that Portugal and Switzerland both produce beer and olives. Portugal's…
A: Production possibility frontier shows different combination of two good or services that can be…
Q: 3. Gains from trade Suppose there exist two imaginary countries, Yosemite and Sequoia. Their labor…
A: Opportunity cost is the cost of producing 1 good in terms of other. Opportunity cost shows the…
Q: Suppose that Italy and Switzerland both produce beer and wine. Italy's opportunity cost of producing…
A: Opportunity cost is the cost of the next best choice. Opportunity cost= Loss of the units/Gain of…
Q: 7. Trading under increasing opportunity costs The following graph shows the production possibilities…
A: PPC: Graphical representation of the combination of two goods that can be produced in the economy in…
Q: QUESTION 1. Consider two countries: South Korea and New Zealand and two goods: Lamb and Air Pumps.…
A: Production means the goods and services produced in an economy. It means the raw material is…
Q: 1. Which description does not correctly characterize the Hecksher-Ohlin (OH) trade model? A…
A: "Since you have asked multiple questions, we will solve first question for you .. If you want any…
Q: If a nation has the lowest opportunity cost of producing a good, that nation has a(m in the…
A: Absolute advantage refers to an individual's, company's, region's, or country's ability to create a…
Q: Poor country Rich country Wheat Cloth 6 8 2 20 (a) What are the opportunity cost ratios for these…
A: opportunity cost is the cost for gaining one opportunity , loose the other opportunity or we can say…
Q: Problem 2. A substantial portion of international trade happens between countries with similar char-…
A: The interchange of similar items from the same industry is referred to as intra-industry commerce.…
Q: 3. Factors that influence international trade In the 1950s, imports and exports of goods and…
A: International trade is the global connection of different trading nations. Two or more nations can…
Q: 6. Optional exercise: Consider a world with two goods (beer and tulips). There are two countries…
A: The Hecksher Ohlin model of trade states that if a country has relatively higher endowments of…
Q: a)When country A can produce a good using fewer absolute inputs than any other country, then country…
A: Absolute advantage arises when the country can produce the good or service with lower resources or…
Q: 5. The price of trade Suppose that Croatia and Norway both produce sunflowers and wheat. Croatia's…
A: Comparative advantage refers to the ability of the country to produce the good at a lower…
Q: Suppose that Slovenia and Luxembourg both produce boots and wheat. Slovenia's opportunity cost of…
A: Comparative advantage refers to the ability to produce goods and services at a lower opportunity…
Q: What are the problems of using Ricardo's theory of comparative advantage in the ac- count of the…
A: The Ricardian model studies international trade. It assumes that the two countries are producing two…
Q: 4. Specialization and trade When a country has a comparative advantage in the production of a good,…
A: Comparative advantage occurs when a country can produce a good at a lower opportunity cost than…
Q: 9. Which of the following statements is (are) correct? (x) Ricardo's theory of comparative advantage…
A: Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: 3: Tariffs and Non-tariff instruments are a huge problem for international trade. a) Why does the…
A: In the international market, trade transactions can be restricted using tariff or non-tariff…
Q: The idea behind comparative advantage reflects the possibility that one party: O may be able to…
A: There are two concepts in international economics, one is absolute advantage and the other is…
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Q: Commodities exported and imported by each nation constitute the trade; C: gains from trade; D:…
A: When talking about exporting and importing of goods and services between countries , it can be said…
Q: Freedonia has a comparative advantage in the production of while Sylvania has a comparative…
A: Comparative Advantage in trade refers to that one country can produce one product at a lower…
Q: Refer to the accompanying figure. For the nation whose PPC is shown, it must be true that Milk…
A: Production possibility frontier shows the different combinations of two goods that can be produced…
Q: 2. True/False The figure to the right depicts a proposed trading situation which Brazil would prefer…
A: Price ratio and terms of trade: The price ratio is nothing but the relative prices of two different…
Q: 7. According to the mercantilists: A) Only one nation can gain from trade, and it is at the expense…
A: Trade is defined as the exchange of commodities and services across the boundary of the country.…
Q: (millions of tons) Key Torland Leeland 20 15 10 5 5 10 15 20 25 Honey (millions of tons) Figure 2…
A: Comparative advantage is when a country is able to produce a particular good or service lower…
Q: 1. Multinational enterprises Which of the following are common characteristics of multinational…
A: Multinational enterprises (MNEs) are companies that have operations in multiple countries. These…
Q: When one producer has a comparative advantage in production, he or she a) can produce more output…
A: Opportunity cost refers to the loss of giving up best alternative while making a choice. There is…
Q: 5. The price of trade Suppose that Portugal and Sweden both produce rye and wine. Portugal's…
A: In order to produce 1 bottle of wine, Portugal has to sacrifice 4 bushels of rye. While in case of…
Q: 3. To which of the following would the mercantilists have objected? a. free trade b. C. d. e.…
A: This can be defined as an economic theory prevalent in the 16th to 18th centuries that emphasized a…
Q: Three students are working on a group project. The project involves three distinct tasks: research,…
A: Absolute advantage refers to the economic concept which is used for referring to the production of…
Q: (a) Does either country have an absolute advantage in the production of wheat or beef? Explain. (b)…
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Q: Suppose that Hungary and Norway both produce sunflowers and wheat. Hungary's opportunity cost of…
A: Comparative advantage is a basic notion in the theory of international trade that emphasizes the…
Q: Question 4 a. What are the gains to be derived from free trade? b. Illustrate, with the use of…
A: Trade is the process through which two or more parties exchange commodities, services, or capital.It…
Q: 3. (a) Consider a standard Hecksher-Ohlin world, with the following endowment of production factors:…
A: A production possibilities frontier (PPF) is a graphical representation of the maximum amount of…
Q: 5. The price of trade Suppose that France and Switzerland both produce jeans and olives. France's…
A: The traditional trade principle still holds true today: each country should specialise in what it…
Q: Indicate whether each of the following statements is true or false. Statement True False 1. There…
A: "Since you have asked a question with multiple sub-parts, we will solve first three sub-parts for…
Q: In the real world we don't observe countries completely specializing in the production goods for…
A: Q 24. In international trade theory, it is stated that one country would engage in trade with…
Q: 6) The trade model of the "factor endowment theory" maintains that a. Comparative advantage…
A: The factor endowment theory holds that countries are likely to be abundant in different types of…
Q: In Poland, one hour of labour can produce 2 tons of coal or 4 bushels of oats. In England, one hour…
A: If two nations, An and B, are thought of, where the makers of A can create awareness with a chance…
Q: 6. Violations of the factor-endowment theory of trade While different natural resources and the…
A: Factor endowment theory explains that the country will export the good if it is relatively abundant…
Q: Question: • How would you explain the idea of comparative advantage to a family or friend who does…
A: Comparative advantage is a condition in which a country can produce a particular product or service…
Q: Explain (with example) the concept of public policy induced comparative advantage.
A: Note: Since you have posted multiple questions, we will provide the solution only to the first five…
Q: Paul Krugman's additions to "International Trade Theory" and what 4) What is his theory? Elaborate…
A: Trading happens when a country has underlying conditions that make output inexpensive, according to…
Q: 5. The price of trade Suppose that Greece and Austria both produce rye and wine. Greece's…
A: Comparative advantage is a circumstance in which a person, firm or nation can provide an item or…
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- 5. The price of trade Suppose that Slovenia and Wales both produce ale and glass. Slovenia's opportunity cost of producing a pane of glass is 5 kegs of ale while Wales's opportunity cost of producing a pane of glass is 9 kegs of ale. By comparing the opportunity cost of producing glass in the two countries, you can tell that production of glass and has a comparative advantage in the production of ale. Suppose that Slovenia and Wales consider trading glass and ale with each other. Slovenia can gain from specialization and trade as long as it receives more than of ale for each pane of glass it exports to Wales. Similarly, Wales can gain from trade as long as it receives more than of glass for each keg of ale it exports to Slovenia. Based on your answer to the last question, which of the following prices of trade (that is, price of glass in terms of ale) would allow both Wales and Slovenia to gain from trade? Check all that apply. 19 kegs of ale per pane of glass has a comparative…5. Suppose a capital abundant country, such as Germany, is entering a free trade agreement with a resource- rich country such as Norway. (YOU DO NOT NEED TO USE A DIAGRAM FOR THIS QUESTION) (a) Explain the pattern of trade, as predicted by Heckscher Óhlin Theorem, between these two nations if they have the same technology and same taste. (b) Explain what happens to price of exports and imports in each country in the post-trade environment. (c) Does trade between these two countries create winners and losers? Explain your answer by discussing what happens to real wages and real returns to resources in these nations. (d) Does the concept of "magnification effect" as predicted by Stolper- Samuelson Theorem apply to your answer in part (c)? Why?4) According to the theory of comparative advantage, a country A. imposes tariffs on goods in which it does not have comparative advantage. B. imports the goods in which it has plenty of factors of production. C. exports the goods in which it does not have comparative advantage. D. imports the goods in which it does not have comparative advantage.
- 1.Using the concept of free trade and the 3 free trade theories discussed in the class materials, explain the difference between absolute advantage and comparative advantage. Explain the difference between free trade and fair trade. Provide an example of your own household or work experience.5. The price of trade Suppose that Croatia and Wales both produce ale and broccoli. Croatia's opportunity cost of producing a bushel of broccoli is 5 kegs of ale while Wales's opportunity cost of producing a bushel of broccoli is 10 kegs of ale. By comparing the opportunity cost of producing broccoli in the two countries, you can tell that production of broccoli and has a comparative advantage in the production of ale. has a comparative advantage in the Suppose that Croatia and Wales consider trading broccoli and ale with each other. Croatia can gain from specialization and trade as long as it receives more than of ale for each bushel of broccoli it exports to Wales. Similarly, Wales can gain from trade as long as it receives more than of broccoli for each keg of ale it exports to Croatia. Based on your answer to the last question, which of the following prices of trade (that is, price of broccoli in terms of ale) would allow both Wales and Croatia to gain from trade? Check all that…5) Ricardo's simplified trade model is based on all of the assumptions except a. costs do not vary with the level of production b. the level of technology is fixed for all nations c. perfect competition prevails in all markets d. capital is the only factor of production 5
- Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure.3. The table below shows output per hour worked in production of wheat and cloths in theUnited States and United Kingdom, respectively.US Wheat (bushels per hour) 12 Cloths (yards per hour) 6 UK Wheat (bushels per hour) 6Cloths (yards per hour) 18 Assess all the statements below and judge which of them is true and which is false.Provide a short justification for your assessment.a) The US has an absolute advantage in the production of wheat.b) The UK has an absolute disadvantage in the production of cloths.c) The opportunity cost of cloths in the US is one-half bushels of wheat.d) The UK has an absolute and comparative advantage in cloth, whereas the US a comparativeadvantage in wheat.e) There is no basis for trade between these two countries because the UK would benefit morethan the US.5. The price of trade Suppose that Ireland and Liechtenstein both produce beets and wheat. Ireland's opportunity cost of producing a bushel of wheat is 5 bushels of beets while Liechtenstein's opportunity cost of producing a bushel of wheat is 11 bushels of beets. By comparing the opportunity cost of producing wheat in the two countries, you can tell that Ireland production of wheat and Liechtenstein has a comparative advantage in the production of beets. Suppose that Ireland and Liechtenstein consider trading wheat and beets with each other. Ireland can gain from specialization and trade as long as it receives more than of beets for each bushel of wheat it exports to Liechtenstein. Similarly, Liechtenstein can gain from trade as of wheat for each bushel of beets it exports to Ireland. long as it receives more than Based on your answer to the last question, which of the following prices of trade (that is, price of wheat in terms of beets) would allow both Liechtenstein and Ireland to…
- 1. The basis of trade Suppose that Germany and Portugal both produce cheese and wine. Germany's opportunity cost of producing a bottle of wine is 2 pounds of cheese. That is, Germany forgoes the production of 2 pounds of cheese when it produces a bottle of wine. Portugal's opportunity cost of producing a bottle of wine is 1/2 pound of cheese. a comparative advantage in the production of wine. a comparative advantage in the production of cheese.B) Comparative Advantage 1. Country A has 100 workers and Country B has 100 workers. Every worker in Country A can produce 6 tons of wheat per year, or can produce 12 tons of corn per year. Every worker in Country B can produce 2 tons of wheat per year, or can produce 10 tons of corn per year. a. Which country has an absolute advantage in wheat? b. Which country has an absolute advantage in corn? c. Which country has a comparative advantage in wheat? d. Which country has a comparative advantage in corn? Suppose initially the countries do not trade and Country A has 50 workers producing corn and 50 producing wheat. Country B has 30 workers producing corn and 70 producing wheat. Fill out the following table: Country A Country B Corn Produced Wheat Produced Now the two countries trade with one another. e. What good does Country A specialize in? f. What good does Country B specialize in? If these countries have all workers produce the product that their country has a comparative advantage…4. Specialization and trade When a country specializes in the production of a good, this means that it can produce this good at a lower opportunity cost than its trading partner. Because of this comparative advantage, both countries benefit when they specialize and trade with each other. The following graphs show the production possibilities frontiers (PPFS) for Maldonia and Lamponia. Both countries produce lemons and sugar, each initially (that is, before specialization and trade) producing 18 million pounds of lemons and 9 million pounds of sugar, as indicated by grey points (star symbols) labeled point A. SUGAR (Millions of pounds) 48 42 38 30 24 18 PPF 12 8 0 0 8 1 Maldonia 12 18 24 30 36 LEMONS (Millions of pounds) 42 48 ? Maldonia has a comparative advantage in the production of production of advantage), the most the two countries can produce is SUGAR (Millions of pounds) 48 42 36 30 24 18 12 6 0 0 PPF 6 Lamponia A 12 18 24 30 36 42 48 LEMONS (Millions of pounds) ? , while…