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comparative advantage

comparative advantage

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Specialization and trade When a country has a comparative advantage in the production of a good, it means that it can produce this good at a lower opportunity cost than its trading partner. Then the country will specialize in the production of this good and trade it for other goods. The following graphs show the production possibilities frontiers (PPFs) for Shenandoah and Congaree. Both countries produce corn and basil, each initially (i.e., before specialization and trade) producing 12 million pounds of corn and 6 million pounds of basil, as indicated by the grey stars marked with the letter A. 4. Specialization and trade When a country has a comparative advantage in the production of a good, it means that it can produce this good at a lower opportunity cost than its trading partner. Then the country will specialize in the production of this good and trade it for other goods. The following graphs show the production possibilities frontiers (PPFS) for Shenandoah and Congares. Both countries produce corn and basil, each initially (Le, before specialization and trade) producing 12 million pounds of corn and 6 million pounds of basil, as indicated by the grey stars marked with the letter A. 28 BASL (Ms of pounds) 68% 12 4 a PPF 4 Shenandoah . 12 16 23 24 CORN (Maons of pounds) 20 32 82 BASL (Mof pounds) 4 • PPF 4 Congre . 12 16 20 24 28 CORN (Maons of pounds) Shenandoah has a comparative advantage in the production of while Congaree has a comparative advantage in the production of Suppose that Shenandoah and Congaree specialize in the production of the goods in which each has a comparative advantage. After specialization, the two countries can produce a total of milion pounds of corn. million pounds of basit and [ Suppose that Shenandoah and Congares agree to trade. Each country focuses its resources on producing only the good in which it has a comparative advantage. The countries decide to exchange 8 million pounds of corn for 8 million pounds of basil. This ratio of goods is known as the price of trade between Shenandoah and Congaree. The following graph shows the same PPF for Shenandoah as before, as well as its initial consumption at point A. Place a black point (plus symbol) on the graph to indicate Shenandoah's consumption after trade. Note: Dashed drop lines will automatically extend to both axes.
Transcribed Image Text:Specialization and trade When a country has a comparative advantage in the production of a good, it means that it can produce this good at a lower opportunity cost than its trading partner. Then the country will specialize in the production of this good and trade it for other goods. The following graphs show the production possibilities frontiers (PPFs) for Shenandoah and Congaree. Both countries produce corn and basil, each initially (i.e., before specialization and trade) producing 12 million pounds of corn and 6 million pounds of basil, as indicated by the grey stars marked with the letter A. 4. Specialization and trade When a country has a comparative advantage in the production of a good, it means that it can produce this good at a lower opportunity cost than its trading partner. Then the country will specialize in the production of this good and trade it for other goods. The following graphs show the production possibilities frontiers (PPFS) for Shenandoah and Congares. Both countries produce corn and basil, each initially (Le, before specialization and trade) producing 12 million pounds of corn and 6 million pounds of basil, as indicated by the grey stars marked with the letter A. 28 BASL (Ms of pounds) 68% 12 4 a PPF 4 Shenandoah . 12 16 23 24 CORN (Maons of pounds) 20 32 82 BASL (Mof pounds) 4 • PPF 4 Congre . 12 16 20 24 28 CORN (Maons of pounds) Shenandoah has a comparative advantage in the production of while Congaree has a comparative advantage in the production of Suppose that Shenandoah and Congaree specialize in the production of the goods in which each has a comparative advantage. After specialization, the two countries can produce a total of milion pounds of corn. million pounds of basit and [ Suppose that Shenandoah and Congares agree to trade. Each country focuses its resources on producing only the good in which it has a comparative advantage. The countries decide to exchange 8 million pounds of corn for 8 million pounds of basil. This ratio of goods is known as the price of trade between Shenandoah and Congaree. The following graph shows the same PPF for Shenandoah as before, as well as its initial consumption at point A. Place a black point (plus symbol) on the graph to indicate Shenandoah's consumption after trade. Note: Dashed drop lines will automatically extend to both axes.
Shenandoah has a comparative advantage in the production of while Congaree has a comparative advantage in the production of Y Suppose that Shenandoah and Congaree specialize in the production of the goods in which each has a comparative advantage. After specialization, the two countries can produce a total of million pounds of bast and milion pounds of [ corn. Suppose that Shenandoah and Congares agree to trade. Each country focuses its resources on producing only the good in which it has a comparative advantage. The countries decide to exchange 8 million pounds of corn for 8 million pounds of basil. This ratio of goods is known as the price of trade between Shenandoah and Congaree. The following graph shows the same PPF for Shenandoah as before, as well as its initial consumption at point A. Place a black point (plus symbol) on the graph to indicate Shenandoah's consumption after trade. Note: Dashed drop lines will automatically extend to both axes. 24 PPF . BASL (Ms of pound) 32 20 4 0 The following graph shows the same PPF for Congaree as before, as well as its initial consumption at point A. 1 . As you did for Shanandoah, place a black point (plus symbal) on the following graph to indicate Congaree's consumption after trade. PPF 4 Shenandoah 12 16 20 CORN (Maons of pounds) . 24 12 Congre 20 20 CORN (Maians of pounds) + Consumption Afer Trade ? Consumption Afar Trade (?) True or False: Without engaging in international trade, Shenandoah and Congaree would not have been able to consume at the after-trade consumption bundles. (Hint: Base this question on the answers you previously entered on this page.) O True O False
Transcribed Image Text:Shenandoah has a comparative advantage in the production of while Congaree has a comparative advantage in the production of Y Suppose that Shenandoah and Congaree specialize in the production of the goods in which each has a comparative advantage. After specialization, the two countries can produce a total of million pounds of bast and milion pounds of [ corn. Suppose that Shenandoah and Congares agree to trade. Each country focuses its resources on producing only the good in which it has a comparative advantage. The countries decide to exchange 8 million pounds of corn for 8 million pounds of basil. This ratio of goods is known as the price of trade between Shenandoah and Congaree. The following graph shows the same PPF for Shenandoah as before, as well as its initial consumption at point A. Place a black point (plus symbol) on the graph to indicate Shenandoah's consumption after trade. Note: Dashed drop lines will automatically extend to both axes. 24 PPF . BASL (Ms of pound) 32 20 4 0 The following graph shows the same PPF for Congaree as before, as well as its initial consumption at point A. 1 . As you did for Shanandoah, place a black point (plus symbal) on the following graph to indicate Congaree's consumption after trade. PPF 4 Shenandoah 12 16 20 CORN (Maons of pounds) . 24 12 Congre 20 20 CORN (Maians of pounds) + Consumption Afer Trade ? Consumption Afar Trade (?) True or False: Without engaging in international trade, Shenandoah and Congaree would not have been able to consume at the after-trade consumption bundles. (Hint: Base this question on the answers you previously entered on this page.) O True O False
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