If two countries have differing opportunity costs of production for two goods, then: a) each country should specialise in the good for which it has a higher opportunity cost of production. b) only the country with an absolute advantage in the production of both goods stands to gain from trade. c) each country should purchase inputs from the other country in order to gain an absolute advantage. d) each country should specialise in the production of the good for which it has a comparative advantage. 1.23

If two countries have differing opportunity costs of production for two goods, then: a) each country should specialise in the good for which it has a higher opportunity cost of production. b) only the country with an absolute advantage in the production of both goods stands to gain from trade. c) each country should purchase inputs from the other country in order to gain an absolute advantage. d) each country should specialise in the production of the good for which it has a comparative advantage. 1.23

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Suppose the United States and Mexico both produce hamburgers and tacos. The combinations of the two goods that each country can produce in one day are presented in the table below. United States Mexico Hamburgers (in tons) Tacos (in tons) Hamburgers (in tons) Tacos (in tons) 162 135 90 108 18 90 180 54 36 45 270 54 Which country has an absolute advantage in producing tacos? The United States Which country has a comparative advantage in producing tacos? Mexico Suppose the United States is currently producing 180 tons of hamburgers and 54 tons of tacos and Mexico is currently producing 36 tons of hamburgers and 45 tons of tacos. If the United States and Mexico each specialize in producing only one good (the good for which each has a comparative advantage), then a total of additional ton(s) of hamburgers can be produced for the two countries combined (enter a numeric response using an integer)
? illustrate an example of trade induced by comparative advantage. They assume that China and France each have 1,000 production units. With one unit of production (a mix of land, labor, capital, and technology), China can produce either 10 containers of toys or 7 cases of wine. France can produce either 2 cases of toys or 7 cases of wine. Thus, a production unit in China is five times as efficient compared to France when producing toys, but equally efficient when producing wine. Assume at first that no trade takes place. China allocates 800 production units to building toys and 200 production units to producing wine. France allocates 200 production units to building toys and 800 production units to producing wine. Trade at France’s Domestic Price. France’s domestic price is 2 containers of toys equals 7 cases of wine. Assume China produces 10,000 containers of toys and exports 400 containers to France. Assume France in turn produces 7,000 cases of wine and exports 1,400…
Suppose that France and Italy both produce wine and cheese. France's opportunity cost of producing a case of cheese is 5 barrels of wine, while Italy's opportunity cost of producing a case of cheese is 10 barrels of wine. By comparing the opportunity cost of producing cheese in the two countries, you can tell that comparative advantage in the production of cheese and has a comparative advantage in the production of wine. Suppose that France and Italy consider trading cheese and wine. France can gain from specialization and trade as long as it receives more than of wine for each case of cheese it exports to Italy. Similarly, Italy can gain from trade as long as it receives of cheese for each barrel of wine it exports to France. more than Based on your answer to the last question, a price ratio between benefit both countries. has a barrels of wine per case of cheese will
According to the "Principle of Comparative Advantage," a country should specialize in producing a good or service if it has:a) The highest opportunity cost b) The lowest opportunity cost c) The highest production cost d) The lowest production cost
The U.S. can produce 100 pounds of beef or 10 cars; in contrast Germany can produce 40 pounds of beef or 30 cars. Which country has the absolute advantage in beef? Which country has the absolute advantage in producing cars? What is the opportunity cost of producing one pound of beef in the U.S. What is the opportunity cost of producing one pound of beef in Germany?
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.
The production possibilities frontiers in the figure to the right show how many bananas and coconuts you (Y) and your neighbor (N) can consume without trade Suppose you are initially consuming 14 bananas and 3 coconuts and your neighbor is initially consuming 3 bananas and 9 coconuts. Now, suppose you and your neighbor specialize by each only producing the good for which you have a comparative advantage You give your neighbor half of your production for half of what he produces. (Enter all responses as integers) If you trade with your neighbor, then you will have additional coconut(s) after the trade and additional banana(s) At the same time, your neighbor will be able to consume additional banana(s) and will be as a result of trade. Quantity of coconuts 26- 2.*.*.*.*. Your PPF 12- 10- Neighbor's PPF 6 8 10 12 14 16 18 20 22 24 26 28 30 32 Quantity of bananas GOO
4.3 Suppose that Britain can produce 10 units of cloth or 5 units of food per day (or any linear combination) with available resources and that Greece can produce 2 units of food per day or 1 unit of cloth (or any combination). Britain has an absolute advantage over Greece in producing both goods. Does it still make sense for these countries to trade? Explain.
6. A) With the following data decide which country has comparative advantage for which good. Show your math. Good A Good B Country 1 300 30 Country 2 60 90 B) Using the data from above prove both countries can be better off trading with each other than if they do not trade. C) Why do we use comparative advantage to decide which country produces which good? Support your answer.
1. There are two firms, firms A and B. Suppose that the two firms both produce Jam and butter and sell them for the same price. Shown below are the combinations of the two goods each firm can produce using the same amounts of labor and capital. Using the information below, which answer provides the most accurate depiction of comparative advantage and absolute advantage? Firm A Exhibit 1 Firm B Jam Butter Jam Butter 0 120 0 100 20 90 20 80 40 60 40 60 60 30 60 40 80 0 80 20 100 0 Firm B has a comparative advantage in butter, and absolute advantage in jam. Firm B has a comparative advantage in butter, and absolute advantage in jam. Firm B has a comparative advantage in butter, and absolute advantage in jam. Firm A has a comparative advantage in jam, and an absolute advantage in jam.