Answer th following:If Nation 2 is to enter trade. In what good will it specialize? Why?If Nation 2 is to specialize in the good of its comparative advantage, how much good X and good Y will Nation 2 produce?Suppose after specialization, Nation 2 exports 100 units of the good of its comparative advantage [your answer in 1], how much of X and Y will it consumer after tradeWill Nation 2 enjoy welfare gains from trade? Provide evidence Consider the two following nations and the amount of output X and Y that they can produce in1an hour. The community utility function of both nation is given by U =X²Y²A.712This means that forXSuppose the international price of good X is Pevery unit of good X, imported, the importing nation must pay - units of Y.7127[i.e. Y1/2 X].=X (units/hr)Y (units/hr)Available Labor Supply (in hrs)Nation 184100=Nation 232100

Comparative advantage refers back to the monetary principle that states that entities (consisting of…

Answered: comparative advantage

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Answer th following:

If Nation 2 is to enter trade. In what good will it specialize? Why?

If Nation 2 is to specialize in the good of its comparative advantage, how much good X and good Y will Nation 2 produce?
Suppose after specialization, Nation 2 exports 100 units of the good of its comparative advantage [your answer in 1], how much of X and Y will it consumer after trade
Will Nation 2 enjoy welfare gains from trade? Provide evidence

Consider the two following nations and the amount of output X and Y that they can produce in
1
an hour. The community utility function of both nation is given by U =
X²Y²
A.
7
12
This means that for
X
Suppose the international price of good X is P
every unit of good X, imported, the importing nation must pay - units of Y.
7
12
7
[i.e. Y
1/2 X].
=
X (units/hr)
Y (units/hr)
Available Labor Supply (in hrs)
Nation 1
8
4
100
=
Nation 2
3
2
100

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

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