150- 140 130+ 120- 110 100- 90 80 70 60 50 40+ 30 20 10 Price Figure 9-1 The figure illustrates the market for coffee in Guatemala. Refer to Figure 9-1. From the figure it is apparent that OA. foreign countries have a comparative advantage in producing coffee, relative to Guatemala. A B. Guatemala has a comparative advantage in producing coffee, relative to the rest of the world. OC. Guatemala will experience a surplus of coffee if trade is not allowed. OD. Guatemala will experience a shortage of coffee if trade is not allowed. B D F H Domestic supply World price 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 Quantity Domestic demand

150- 140 130+ 120- 110 100- 90 80 70 60 50 40+ 30 20 10 Price Figure 9-1 The figure illustrates the market for coffee in Guatemala. Refer to Figure 9-1. From the figure it is apparent that OA. foreign countries have a comparative advantage in producing coffee, relative to Guatemala. A B. Guatemala has a comparative advantage in producing coffee, relative to the rest of the world. OC. Guatemala will experience a surplus of coffee if trade is not allowed. OD. Guatemala will experience a shortage of coffee if trade is not allowed. B D F H Domestic supply World price 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 Quantity Domestic demand

Principles of Macroeconomics (MindTap Course List)

7th Edition

ISBN:9781285165912

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter3: Interdependence And The Gains From Trade

Section: Chapter Questions

Problem 9PA

See similar textbooks

Similar questions

8. Assume that now trade happens. The relative supply of wine in the home country is less than the world (because the home country is better at making laptops). What would happen to the relative price of wine to laptop in the home country when trade is allowed? Which group would benefit from this? a) Pwine/Ptaptop would increase and laptop manufacturers would gain b) Pwine/Plaptop would increase and wine makers would gain c) Pwine/Ptaptop would decrease and laptop manufacturers would gain d) Pwine/Piaptop would decrease and wine makers would gain
27. Suppose IP is the international trade price and this country's government imposes a $3 tariff on imports of this good, what will be the loss to consumers? 28. Suppose IP is the international trade price and this country's government imposes a $3 tariff on imports of this good, what will be the net loss to this econom? 29. Suppose IP is the international trade price and this country's government imposes a $3 tariff on imports of this good, how much revenue will the government collect? 30. Suppose IP is the international trade price and this country's government imposes a 6 unit quota on imports of this good, what will be the net loss to this econom?
22. < Previou Suppose there are three countries in the world: Volcania, Portlandia, and Minitown. These three countries produce a total of 3 different kinds of goods: Raspberries, Pomegranates, and Guavas. If Volcania imposes a tariff on Raspberries from Portlandia, and Minitown. OThe price of Raspberries in Volcania will increase for everyone OThe Raspberries industry in Minitown will benefit OThe Raspberries in Portlandia will be the only one to see higher prices for this product
Task 3. You know the following information about the wine market in Georgia With tariff Without tariff World price Tariff rate (ad valorem) Consumption (bottle) Production (bottle) 30S 30$ 10% 40.000 50.000 20.000 10.000 a, Is Georgia a small country or a large country? Why? b. Plot a graph with demand and supply curves and indicate the situation of the domestic market with and without tariffs. c, Suppose that the country decides to liberalize trade in wine and remove the tariff. Do consumers win or lose due to this? Show on the graph and calculate how much they win or lose. d, Do domestic wine producers win or lose due to liberalization? Show on the graph and calculate how much they win or lose. e, Does the government win or lose due to liberalization? Show on the graph and calculate how much it wins or loses. f. What is the net national loss or gain due to liberalization?
Discussion 11 Comparative Advantage Example Assume that there are two countries, Country A which earns $5,000 per capita GDP, and Country 8, which earns $50.000 per capita GOP. Using Country A and Country B and two products that you choose, thoroughly and clearly explain an example of how these countries can gain from trade pursuant to the doctrine of Comparative Advantage.
1. Two countries produce and consume T-shirts: the US and the ROW. Problems 1-2 are based on the supply and demand schedules for the two countries given below. Note: The supply and demand curves are straight lines. Quantities are in millions of T-shirts. P 10 2 3 4 5 6 7 8 9 11 13 14 15 16 12 0 This problem asker S 0. 0 1 2 3 9 10 11 12 0 0 0 4 5 6 7 8 US D 32 30 28 26 24 22 20 18 16 14 12 10 8 6 4 2 0 S 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 ROW D 13 12 11 10 9 8 7 6 5 4 3 2 1 0 0 0
9. Use the information given in the table below to answer the question United States South Africa Computers 1 Shoes 6 pairs З раirs Which country or countries have an absolute advantage and comparative advantage in shoes? South Africa has an absolute and comparative advantage in shoes. The United States has an absolute and comparative advantage in shoes. The United States has a comparative advantage and South Africa has an absolute advantage in shoes. A В C South Africa has a comparative advantage and the United States has an absolute advantage in shoes.
Q.3 Suppose the following table given below describes the production possibilities of Rice and Cloth for Pakistan and China: Wheat (Kgs/hour) Cloth (Meters/hour) PAKISTAN 5 10 CHINA 10 40 Without trade, what is the relative price of wheat in terms of cloth in Pakistan? What is the price in China? Which country has an absolute advantage in the production of each good? Which country has a comparative advantage in the production of each good? If both countries trade with each other, which good will each export? What is the range of prices at which trade can occur?
3. Gains from trade Suppose there exist two imaginary countries, Yosemite and Sequoia. Their labor forces are each capable of supplying four million hours per day that can be used to produce pistachios, chinos, or some combination of the two. The following table shows the amount of pistachios or chinos that can be produced by one hour of labor. Country Yosemite Sequoia Pistachios Chinos (Pounds per hour of labor) (Pairs per hour of labor) 6 12 16 4 Suppose that initially Yosemite uses 1 million hours of labor per day to produce pistachios and 3 million hours per day to produce chinos, while Sequoia uses 3 million hours of labor per day to produce pistachios and 1 million hours per day to produce chinos. As a result, Yosemite produces 6 million pounds of pistachios and 36 million pairs of chinos, and Sequoia produces 12 million pounds of pistachios and 16 million pairs of chinos. Assume there are no other countries willing to engage in trade, so, in the absence of trade between these…
9. Which of the following is true about trade? The basis for trade is absolute advantage Trade results in a reallocation of resources rather than creation of value If we specialize in our comparative advantage and then trade with our neighbor, both of us can be made better off Trade never makes sense if one person is better at producing both goods All of the above are true
4. Tariffs Suppose Kenya is open to free trade in the world market for wheat. Because of Kenya's small size, the demand for and supply of wheat in Kenya do not affect the world price. The following graph shows the domestic wheat market in Kenya. The world price of wheat is Pw =$250 per ton. On the following graph, use the green triangle (triangle symbols) to shade the area representing consumer surplus (CS) when the economy is at the free-trade equilibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producer surplus (PS). 490 Domestic Demand Domestic Supply 460 CS 430 400 370 PS 340 310 280 250 220 190 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of tons of wheat) If Kenya allows international trade in the market for wheat, it will import tons of wheat. Now suppose the Kenyan government decides to impose a tariff of $60 on each imported ton of wheat. After the tariff, the price Kenyan consumers pay for a ton of wheat is $ and Kenya will import tons…
6. The arguments for restricting trade Suppose there is a policy proposal to increase trade restrictions on imported microprocessors to the United States. Read the following scenario and answer the question that follows. A congresswoman from a state with several microprocessor factories argues that the government should impose a tariff on microprocessors because they are a necessary input into the production of various weapons. Free trade, she contends, would make the United States overly dependent on foreign countries for the supply of microprocessors and thus, in case of war, unable to make enough weapons to defend itself. Which of the following justifications is the congresswoman using to support their argument in favor of the trade restriction on microprocessors? Using-protection-as-a-bargaining-chip argument O National-security argument O Jobs argument O Unfair-competition argument O Infant-industry argument