Maldonia Desonia 48 48 42 42 36 36 PPF 30 30 24 24 18 PPF 18 12 12 --- -- --- -- 6 6 12 18 24 30 36 42 48 6 12 18 24 30 36 42 48 GRAIN (Millions of pounds) GRAIN (Millions of pounds) Maldonia has a comparative advantage in the production of , while Desonia has a comparative advantage in the production of Suppose that Maldonia and Desonia 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 grain and million pounds c tea. Suppose that Maldonia and Desonia 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 18 million pounds of grain for 18 million pounds of tea. This ratio of goods is known as the price of trade between Maldonia and Desonia. (spunod jo suojUW) VEL నీ వీ TEA (Millions of pounds)

Maldonia Desonia 48 48 42 42 36 36 PPF 30 30 24 24 18 PPF 18 12 12 --- -- --- -- 6 6 12 18 24 30 36 42 48 6 12 18 24 30 36 42 48 GRAIN (Millions of pounds) GRAIN (Millions of pounds) Maldonia has a comparative advantage in the production of , while Desonia has a comparative advantage in the production of Suppose that Maldonia and Desonia 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 grain and million pounds c tea. Suppose that Maldonia and Desonia 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 18 million pounds of grain for 18 million pounds of tea. This ratio of goods is known as the price of trade between Maldonia and Desonia. (spunod jo suojUW) VEL నీ వీ TEA (Millions of pounds)

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

3. Two areas, Europe and America, can produce only goods A and B, under constant costs as indicated below. What will be the result of free trade between the two areas? In Europe In America 1 unit of good A 2 hours of labor 3 hours of labor 1 unit of good B 4 hours of labor 5 hours of labor a. Europe will export A and B to America. b. Europe will import A and export B. c. Europe will import B and export A. d. Europe will import A and B from America. e. No trade will take place.
The countries of Nickeltown and Lykesville each produce two goods: Ovens and Dishwashers. The table below lists the production for each good, for each country per year when each country uses half of their resources to produce each good. Country Production of Ovens Production of Dishwashers Nickeltown 105 Lykesville 147 What is the opportunity cost of producing 1 Ovens in Nickeltown Dishwashers 70 42 What is the opportunity cost of producing 1 Ovens in Lykesville Dishwashers ONickeltown OLykesville ONot enough information Which country has a comparative advantage in producing Ovens?
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
Consider two neighboring island countries called Bellissima and Dolorium. They each have 4 million labor hours available per week that they can use to produce rye, jeans, or a combination of both. The following table shows the amount of rye or jeans that can be produced using 1 hour of labor. Rye Jeans Country (Bushels per hour of labor) (Pairs per hour of labor) Bellissima 12 24 Dolorium 8 32 Initially, suppose Bellissima uses 1 million hours of labor per week to produce rye and 3 million hours per week to produce jeans, while Dolorium uses 3 million hours of labor per week to produce rye and 1 million hours per week to produce jeans. Consequently, Bellissima produces 12 million bushels of rye and 72 million pairs of jeans, and Dolorium produces 24 million bushels of rye and 32 million pairs of jeans. Assume there are no other countries willing to trade goods, so, in the absence trade between these two countries, each country consumes the amount of rye and jeans it produces. v of…
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?
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 D and for the United States is alternative S. Product Apparel Chemicals (tons) Product Apparel Chemicals (tons) (Click to select) ✓ China Production Possibilities A 10,000 0 units B 8,000 4 6,000 8 U.S. Production Possibilities R S 30,000 24,000 0 6 T 18,000 12 ton(s) D 4,000 12 U 12,0000 18 E 2,000 16 V 6,000 24 Instructions: Enter your answers as whole numbers. a. Are comparative-cost conditions such that the two countries should specialize? F 0 20 W 0 30 If so, what product should each produce? China should produce (Click to select) The United States should produce (Click to select) ✓ b. What is the total gain in apparel and chemical output that would result from such specialization? Apparel: Chemicals:
“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.
The table below for the United States and Mexico shows maximum feasible production rates per acre of wheat if no rice is produced and maximum feasible production rates per acre of rice if no wheat are produced. Assume that the opportunity costs of producing these goods are constant in both countries. Output per Acre with Trade Wheat 80 tons United States Mexico 55 tons For the United States, the opportunity cost of 1 ton of wheat is tons of rice. (Enter your response rounded to two decimal places.) has a comparative advantage in wheat, and has a comparative advantage in rice. Now consider the following table that shows the production and consumption of wheat and rice if there is no trade. Output per Acre with No Trade Wheat 40.0 tons 27.5 tons United States Mexico Total output of wheat if the two countries do not trade tons. (Enter your response rounded to one decimal place.) Total output of rice if the two countries do not trade tons. (Enter your response rounded to one decimal place)…
Candonia has a comparative advantage in the production of , while Desonia has a comparative advantage in the production of . Suppose that Candonia and Desonia specialize in the production of the goods in which each has a comparative advantage. After specialization, the two countries can produce a total of
Assume that England and Spain can switch between producing cheese and producing bread at a constant rate. Labor Hours Needed to Make 1 Unit of Number of Units Produced in 40 Hours Cheese Bread Cheese Bread England 1 4 40 10 Spain 4 8 10 5 Refer to Table 3-5. England has a comparative advantage in the production of a. neither good and Spain has a comparative advantage in the production of both goods. b. bread.
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.
Suppose that Croatia and Wales both produce beets and wheat. Croatia's opportunity cost of producing a bushel of wheat is 4 bushels of beets while Wales's opportunity cost of producing a bushel of wheat is 11 bushels of beets. By comparing the opportunity cost of producing wheat in the two countries, you can tell that production of wheat and has a comparative advantage in the production of beets. Suppose that Croatia and Wales consider trading wheat and beets with each other. Croatia can gain from specialization and trade as long as it receives more than ▼ of beets for each bushel of wheat it exports to Wales. Similarly, Wales can gain from trade as long as it receives more of wheat for each bushel of beets it exports to Croatia. than has a comparative advantage in the Based on your answer to the last question, which of the following prices of trade (that is, price of wheat in terms of beets) would allow both Wales and Croatia to gain from trade? Check all that apply. ☐ 6 bushels of…