3. Are the following statements true or false? Explain in each case. (a) "Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods." (b) "Certain very talented people have a comparative advantage in everything they do." (c) "If a certain trade is good for one person, it can?t be good for the other one."

3. Are the following statements true or false? Explain in each case. (a) "Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods." (b) "Certain very talented people have a comparative advantage in everything they do." (c) "If a certain trade is good for one person, it can?t be good for the other one."

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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5. The price of trade Suppose that Greece and Austria both produce rye and wine. Greece's opportunity cost of producing a bottle of wine is 5 bushels of rye while Austria's opportunity cost of producing a bottle of wine is 11 bushels of rye. By comparing the opportunity cost of producing wine in the two countries, you can tell that has a comparative advantage in the production of wine and has a comparative advantage in the production of rye. Suppose that Greece and Austria consider trading wine and rye with each other. Greece can gain from specialization and trade as long as it receives more than of rye for each bottle of wine it exports to Austria. Similarly, Austria can gain from trade as long as it receives more than of wine for each bushel of rye it exports to Greece. Based on your answer to the last question, which of the following prices of trade (that is, price of wine in terms of rye) would allow both Austria and Greece to gain from trade? Check all that apply. 2 bushels of rye…
5. The price of trade Suppose that Italy and Switzerland both produce jeans and stained glass. Italy's opportunity cost of producing a pane of stained glass is 3 pairs of jeans while Switzeriand's opportunity cost of producing a pane of stained glass is 9 pairs of jeans. By comparing the opportunity cost of producing stained glass in the two countries, you can tell that has a comparative advantage in the production of stained glass and has a comparative advantage in the production of jeans. Suppose that Italy and Switzerland consider trading stained glass and jeans with each other. Italy can gain from specialization and trade as long as it receives more than of jeans for each pane of stained glass it exports to Switzerland. Similarly, Switzerland can gain from trade as long of stained glass for each pair of jeans it exports to Italy. as it recelves more than Based on your answer to the last question, which of the tollowing prices of trade (that is, price of stained glass in terms of…
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.
Please do D and E
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.
2. The table below summarizes the number of hours it takes to manufacture cars and dinghy in Germany and PNG. No. of hours to make one car No. of hours to build a dinghy Germany Papua New Guinea 30 20 60 30 a. Which country has an absolute advantage at making cars? Which country has an absolute advantage at making dinghy? b. Estimate the opportunity cost of making car and dinghy in each set of countries. Which country has a comparative advantage for manufacturing cars? Which set of country has a comparative advantage for manufacturing low quality cars? с.
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…
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Concept Question 4.9 Question Help v A country produces pears and barley. 10- 1.) Using the 3-point curved line drawing tool, draw a representative PPC for this country. Label it PPC,. 2.) Suppose that a breakthrough in technology makes all agriculture more productive. Using the 3-point curved line drawing tool, draw a new PPC showing the effect of this change. Label it PPC,. Carefully follow the instructions above, and only draw the required objects. 10 Pears (millions of bushels per year) Barley (millions of bushels per year)
2. Suppose that two countries can produce wheat or cotton. If country A produces only wheat it can produce 55 units of wheat, and if it produces only cotton it can produce 35 units of cotton. If country B produces only wheat it can produce 65 units of wheat, and if it produces only cotton it can produce 45 units of cotton. Given the production possibilities curves above, which of the following would be feasible terms of trade between country A and country B? a. one unit of wheat for 0.75 unit of cotton. b. one unit of cotton for 1.5 units of wheat. c. one unit of wheat for 0.55 unit of cotton. d. one unit of cotton for 1.67 units of wheat. e. all of the above are feasible terms of trade. f. none of the above are feasible terms of trade.
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…
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