Interdependence and the Gains from 'Trade I. The Principle of Comparative Advantage (what is the principle of comparative advantage?) A. Opportunity Cost and Comparative Advantage B. Comparative Advantage and Specialization of Trade C. The Price of Specialization of Trade II. Absolute Advantage (what is absolute advantage?) Answer the following questions based on your knowledge on comparative advantage and absolute advantage. 1. Why do people choose to become interdependent as opposed to self-sufficient? 2. Whys is comparative advantage important in determining trade instead of absolute advantage? 3. What are the gains from trade? 4. Why is a restriction of trade likely to reduce material welfare? 5. Suppose a lawyer that earns 2,000 pesos per hour can also type 200 words per minute. Should the lawyer hire secretary who can only type 50 words per minute? why? 6. Suppose a worker in Germany can produce 15 computers or 5 tons of grain per month. Suppose a worker in Poland can produce 4 computers or 4 tons of grain per month. For simplicity, assume that each country has only one worker.

Interdependence and the Gains from 'Trade I. The Principle of Comparative Advantage (what is the principle of comparative advantage?) A. Opportunity Cost and Comparative Advantage B. Comparative Advantage and Specialization of Trade C. The Price of Specialization of Trade II. Absolute Advantage (what is absolute advantage?) Answer the following questions based on your knowledge on comparative advantage and absolute advantage. 1. Why do people choose to become interdependent as opposed to self-sufficient? 2. Whys is comparative advantage important in determining trade instead of absolute advantage? 3. What are the gains from trade? 4. Why is a restriction of trade likely to reduce material welfare? 5. Suppose a lawyer that earns 2,000 pesos per hour can also type 200 words per minute. Should the lawyer hire secretary who can only type 50 words per minute? why? 6. Suppose a worker in Germany can produce 15 computers or 5 tons of grain per month. Suppose a worker in Poland can produce 4 computers or 4 tons of grain per month. For simplicity, assume that each country has only one worker.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter3: Interdependence And The Gains From Trade

Section: Chapter Questions

Problem 6PA

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Interdependence and the Gains from Trade I. The Principle of Comparative Advantage (what is the principle of comparative advantage?) A. Opportunity Cost and Comparative Advantage B. Comparative Advantage and Specialization of Trade C. The Price of Specialization of Trade II. Absolute Advantage (what is absolute advantage?) Answer the following questions based on your knowledge on comparative advantage and absolute advantage. 1. Why do people choose to become interdependent as opposed to self-sufficient? 2. Whys is comparative advantage important in determining trade instead of absolute advantage? 3. What are the gains from trade? 4. Why is a restriction of trade likely to reduce material welfare? 5. Suppose a lawyer that earns 2,000 pesos per hour can also type 200 words per minute. Should the lawyer hire a secretary who can only type 50 words per minute? why? 6. Suppose a worker in Germany can produce 15 computers or 5 tons of grain per month. Suppose a worker in Poland can produce 4…
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