coffeewhile Lamponia has a comparative advantage in theSuppose that Candonia and Lamponia specialize in the production of the goods in which each has aCandonia has a comparative advantage in the production ofgrain▼production ofcomparative advantage. After specialization, the two countries can produce a total ofgrain.million pounds of coffee andNME TENTAT102. Smillion pounds of19 MINTELLUSC0100554 A country may specialize in the production of a good that it can produce at a lower opportunity cost than its trading partners. Because of thiscomparative advantage, countries benefit when they specialize and trade with each other.The following graphs show the production possibilities curves (PPCs) for Candonia and Lamponia. Both countries produce grain and coffee, eachinitially (i.e., before specialization and trade) producing 12 million pounds of grain and 6 million pounds of coffee, as indicated by the grey starsmarked with the letter A.3228BCOFFEE (Millions of pounds)2416120PPC14CandoniaA82412 16 20GRAIN (Millions of pounds)2832?COFFEE (Millions of pounds)3228242016124010PPC4LamponiaA411812 16 20 24GRAIN (Millions of pounds)2632?

The PPF is also referred to as the production possibility curve (PPC). It is a key economic concept…

coffee , while Lamponia has a comparative advantage in the Candonia has a comparative advantage in the production of Suppose that Candonia and Lamponia specialize in the production of the goods in which each has a million pounds of million pounds of coffee and production of grain comparative advantage. After specialization, the two countries can produce a total of

coffee , while Lamponia has a comparative advantage in the Candonia has a comparative advantage in the production of Suppose that Candonia and Lamponia specialize in the production of the goods in which each has a million pounds of million pounds of coffee and production of grain comparative advantage. After specialization, the two countries can produce a total of

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The following hypothetical production possibilities tables are for China and the United States. Assume that before specialization and trade, the optimal product mix for China is alternative B and for the United States is alternative U. a. Are comparative-cost conditions such that the two areas should specialize? If so, what product should each produce? b. What is the total gain in apparel and chemical output that would result from such specialization? c. What are the limits of the terms of trade? Suppose that the actual terms of trade are 1 unit of apparel for 1 unit of chemicals and that 4 units of apparel are exchanged for 6 units of chemicals. What are the gains from specialization and trade for each nation?
make sure to select all that applies
Which of the following statements is true? A country that has the absolute advantage in producing a good also has the comparative advantage in producing that good. The country with the higher opportunity cost of producing a good has the comparative advantage in producing that good. O There are mutually beneficial gains from trade if opportunity costs differ. A country can have a comparative advantage in the production of all goods.
2. Answer letter c and D.
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“The U.S. and Mexico can gain from trade with one another by taking advantage of the low cost of producing microchips in the U.S and the low cost of producing brooms in Mexico. The cost of producing one broom in U.S is 9 microchips. In Mexico the cost of producing a broom is only 1/9 microchips. If the U.S. produces microchips and imports brooms, and if Mexico produces brooms and imports microchips, both countries will gain from trade because they‟ll each produce the good they can produce more cheaply and import the good that the other country produces more cheaply. Note that the U.S. has an absolute advantage in the production of microchips while Mexico has an absolute advantage in the production of brooms.” In context of International Business and Trade the above example of US and Mexico focuses on absolute advantage. Explain the theory of absolute advantage and comparative advantage and also how nation states are competing to gain advantage over each other.
has an absolute advantage in the production of barley, and has an absolute advantage in the production of alfalfa. bushels of barley, whereas Megan's opportunity cost of producing 1 bushel of opportunity cost of producing alfalfa than Megan, has a has a comparative advantage in the production of barley. Larry's opportunity cost of producing 1 bushel of alfalfa is alfalfa is bushels of barley. Because Larry has a comparative advantage in the production of alfalfa, and
The hypothetical nations Wat and Xat have the production possibilities for rice and corn given in the accompanying tables. Assume that Wat originally produced rice and corn at combination C and that Xat originally produced combination B. If the nations now fully specialize based on comparative advantage, the total gains from specialization and trade are
Which country has comparative advantage in the production of washing machines and automobiles?
Suppose that Poland and Wales both produce ale and glass. Poland's opportunity cost of producing a pane of glass is 4 kegs of ale while Wales's opportunity cost of producing a pane of glass is 12 kegs of ale. By comparing the opportunity cost of producing glass in the two countries, you can tell thatWales has a comparative advantage in the production of glass andPoland has a comparative advantage in the production of ale. Suppose that Poland and Wales consider trading glass and ale with each other. Poland 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 Poland. 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 Poland to gain from trade? Check all that apply. 8 kegs of…