6. Trading under increasing opportunity costsThe following graph shows the production possibilities frontier for the imaginary country of Contente under conditions of increasing costs. In theabsence of trade, the relative cost of rice in Contente in terms of tablets (or the marginal rate of transformation (MRT) of rice into tablets) isshown by the slope of line fi, tangent to the production possibilities frontier at point A.300270Consumption After Trade2402101801501209060302.101214161820TABLETSWhich of the following most accurately describes Contente's economy in the absence of trade?RICE (Bushels) Which of the following most accurately describes Contente's economy in the absence of trade?Contente produces and consumes 6 tablets and 234 bushels of rice.Contente produces 6 tablets and 234 bushels of rice.O Contente produces and consumes 6 tablets and 180 bushels of rice.Contente produces 234 bushels of rice but consumes only 180 bushels of rice.O Contente consumes 6 tablets and 234 bushels of rice.At point A, the slope of line ti reveals that Contente must foregobushels of rice in order to produce 1 tablet. (Hint: Select a line to see itsslope.)Suppose that Contente recognizes that it has a comparative advantage in the production of tablets. Contente decides to specialize in making tabletsand enters international trade. The international terms of trade (the price of rice in terms of tablets) are shown by the slope of the line t2, tangent tothe production possibilities frontier at point B.The slope of 12 reveals that now Contente foregoes|bushels of rice in order to produce 1 tablet. This means that the absolute value of theproduction possibilities frontier's slopeAssume that Contente chooses to consume the same number of tablets as it did in the absence of trade.On the previous graph, use the purple point (diamond symbol) to indicate Contente's consumption after trade.According to the graph, Contente's production gain from specialization isand its consumption gain from trade is

Meaning of Opportunity Cost: The term opportunity cost refers to the situation under which the…

6. Trading under increasing opportunity costs The following graph shows the production possibilities frontier for the imaginary country of Contente under conditions of increasing costs. In the absence of trade, the relative cost of rice in Contente in terms of tablets (or the marginal rate of transformation (MRT) of rice into tablets) is shown by the slope of line t, tangent to the production possibilities frontier at point A. 300 270 Consumption After Tradeo 240 210 180 150 120 90 60 30 10 12 TABLETS 14 16 18 20 Which of the following most accurately describes Contente's economy in the absence of trade? RICE (Bushels)

6. Trading under increasing opportunity costs The following graph shows the production possibilities frontier for the imaginary country of Contente under conditions of increasing costs. In the absence of trade, the relative cost of rice in Contente in terms of tablets (or the marginal rate of transformation (MRT) of rice into tablets) is shown by the slope of line t, tangent to the production possibilities frontier at point A. 300 270 Consumption After Tradeo 240 210 180 150 120 90 60 30 10 12 TABLETS 14 16 18 20 Which of the following most accurately describes Contente's economy in the absence of trade? RICE (Bushels)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that, with constant opportunity costs, Spain can produce 8,000 units of clothing if it devotes all of its resources to clothing production and 2,000 units of wheat if it devotes all of its resources to wheat production. The cost of producing wheat in terms of clothing woudl be: O 2 wheat:0.4 clothing Ol wheat:0.25 clothing O 2 wheat:4 clothing O1 wheat:4 clothing
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…
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12. Given this set of production possibilities and consumption (trade) possibilities frontiers, what happens to the prices of wine and cloth in each country as a result of trade? a) The price of wine in Portugal increases from 1/3 yard/bottle to 1/2 yard/bottle. b) The price of cloth in Portugal decreases from 3 bottles/yard to 2 bottles/yard. c) The price of wine in England decreases from 1 yard/bottle to 1/2 yard/bottle. d) The price of cloth in England increases from 1 bottle/yard to 2 bottles/yard. e) All of the above
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…
Perry's Production Possibilities Frontier 20 18 16 14 12 10 8 6 4 2 poems 12 3 4 5 6 + 7 8 H> novels I poems 20 18+ 16 14 12 10 8 6 4 2 1 2 Jordan's Production Possibilities Frontier + 3 4 + + 5 6 7 8 novels Refer to Figure 3-4. Perry has a comparative advantage in the production of novels and Jordan has a comparative advantage in the production of poems. poems and Jordan has a comparative advantage in the production of novels. novels and Jordan has a comparative advantage in the production of neither good. neither good and Jordan has a comparative advantage in the production of novels.
Suppose that opportunity costs are constant in both France and Italy. In France, maximum feasible hourly production levels are either 3 units of wheat or 5 units of wine. In Italy, maximum feasible hourly production levels are either 4 units of wheat or 10 units of wine. It is correct to state that A. Italy has a comparative advantage in producing wine. B. France has a comparative advantage in producing both wheat and wine. C. Italy has a comparative advantage in producing both wheat and wine. D. France has a comparative advantage in producing wine.
1. The following production possibilities schedule shows the quantities of soybeans and oil that can each be produced in Canada and Mexico with one unit of equivalent resources Refer to the table below. Mexico would not gain by producing and exporting oil and importing soybeans unless it received Canada Mexico Soybeans (bushels) 60 24 Oil (barrels) 10 8 O more than 6 bushels of soybeans per barrel of oil O more than 10 barrel of oil O any quantity of soybeans O more than 3 bushels of soybeans per barrel of oil
According to the Infant Industry Argument Poor countries can foster economic development by using tariffs to protect new firms while they learn to become more productive. O Countries that allow children to work have an unfair advantage in international trade. O Costs of young firms are low because their workers lack seniority, and this contributes to comparative advantage. O When technological change creates a new product, it is the innovating country that is likely to be able to export it.
7. What is the law of comparative advantage? According to the law of comparative advantage, what should be the distin- guishing characteristics of the goods a nation produces? What should be the distinguishing characteristics of the goods a na- tion imports? How will international trade influence people's production levels and living standards? Explain. 15
QUESTION 13 wine 90 8888888 80 70 60 50 40 30 20 PPF Portugal 1 CPF 10. 0 0 10 20 30 40 50 60 cloth wine 90 80 70 60 50 40 30 20 10 England 1 PPF CPF 0 0 10 20 30 40 50 60 cloth 13. According to the above set of production possibilities and consumption (trade) possibilities frontiers, what will happen to production and relative prices once trade is opened between these two countries? O a) Production of cloth in Portugal will fall to zero, while the price of wine will fall to ½ yd/bottle. b) Production of cloth in England will fall to zero, while the price of wine will increase to ½ yd/bottle. c) Production of wine in Portugal will increase to 90, while the price of cloth will fall to 2 yd/bottle. d) Production of wine in England will increase to 60, while the price of cloth will fall to 3 bottles/yd.
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…