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Starting with the production frontiers for Nation 1 and Nation 2 shown in Figure 5.4, show graphically that even with a small difference in tastes in the two nations, Nation 1 would continue to have a
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- 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 Candonia and Lamponia. Both countries produce grain and sugar, each initially (i.e., before specialization and trade) producing 24 million pounds of grain and 12 million pounds of sugar, as indicated by the grey stars marked with the letter A. SUGAR (Millions of pounds) 64 56 48 PPF 40 32 24 16 8 0 0 8 Candonia 16 24 32 40 48 GRAIN (Millions of pounds) 56 64 (?) SUGAR (Millions of pounds) 64 56 48 40 32 24 16 8 0 PPF ———— 0 8 Lamponia A 16 24 32 40 48 GRAIN (Millions of pounds) 56 64 ? Candonia has a comparative advantage in the production of sugar while Lamponia has a comparative advantage in the grain production of ▼ . Suppose that Candonia and Lamponia…Given: (1) two nations (1 and 2) which have the same technology but different factor endowments and tastes, (2) two commodities (X and Y) produced under increasing costs conditions, and (3) no transportation costs, tariffs, or other obstructions to trade. Prove geometrically that mutually advantageous trade between the two nations is possible. Note: Your answer should show the autarky (no-trade) and free-trade points of production and consumption for each nation, the gains from trade of each nation, and express the equilibrium condition that should prevail when trade stops expanding.)The demand for cameras in a certain country is given by D=8000−30P, where P is the price of a camera. Supply by domestic camera producers is S=4000+10P. Suppose that world price of a camera is $150. If this country decides to trade, which of the following is true? Group of answer choices 3000 cameras will be exported Domestic production of cameras will decrease by 500 Domestic production of cameras will increase by 500 2000 cameras will be imported
- Consider a two country, two goods, one factor (labor) model of international trade. Suppose home country require 1 units of labor to produce a unit of cloth and 1 unit of labor to produce a unit of wine (regardless of output levels). Foreign country requires 2 unit of labor to produce 1 unit of cloth and 1.5 units of labor to produce 1 unit of wine (regardless of output levels). (a) Which country has the comparative advantage in producing wine? Justify your answer. (b) Which country has the absolute advantage in producing wine? (c) Which country will have higher autarky price of wine in terms of cloth?A person or nation that has a comparative advantage in the production of a good, should A) Specialize in the production of that good B) Have the highest opportunity cost C) Not specialize in the production of that good D)Automatically has an absolute advantageIf each country specializes in the good in which it has a comparative advantage,....will gain from that trade because
- Assume that Trinbago is a small country that produces wine and motor vehicles, where motorvehicles are capital intensive. Trinbago is also capital intensive, and the standard Heckscher -Ohlin(H-O) assumptions hold. The other country in the model is Vincyland.Could you assist with 2 graphs illustrating 1. The Hecksher Ohlin model based on the above this should show what the theory of comparative advantage stipulates 2. What trade pattern would occur if the Leontief Paradox holds how will this look graphically.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 Candonia and Sylvania. Both countries produce lemons and coffee, each initially (i.e., before specialization and trade) producing 24 million pounds of lemons and 12 million pounds of coffee, as indicated by the grey stars marked with the letter A. Candonia has a comparative advantage in the production of , while Sylvania has a comparative advantage in the production of . Suppose that Candonia and Sylvania 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 lemons and million pounds of coffee. Suppose that Candonia and…Consider an international trade model consisting of three countries X, Y, and Z. Suppose X uses domestically, sends of its production to Y, and sends of its production to Z. Suppose Y uses domestically, sends of its production to X, and sends of its production to Z. Suppose Z uses sends of its production to X and sends of its production to Y. Assume this is a closed Leontief model. of its production of its production of its domestic goods, If we know country Z produced 124 thousand units of goods, then country X produces country Y produces thousand units of goods. thousand units of goods and
- Freedonia has a comparative advantage in the production of (grain, tea, neither grain nor tea, both grain and tea), while Desonia has a comparative advantage in the production of (grain, tea, neither grain nor tea, both grain and tea). If each fully specializes that is, produces only the good for which each has a comparative advantage, the most the two countries can produce is ( )million pounds of grain and ( )million pounds of tea. As you did for Freedonia, use the green line (triangle symbol) to plot the trading possibilities line (TPL) for Desonia. Then place the black point (plus symbol) on the trading possibilities line to indicate Desonia’s consumption after specialization and trade. True or False: Without engaging in international trade, Freedonia and Desonia would not have been able to consume at the after-trade consumption bundles. (Hint: Base your answer to this question on the answers you previously entered on this page.) a) True b) FalseConsider a simplified example of two countries - Singapore and Indonesia - producing two goods – telecommunications equipment and electrical circuit apparatus. Using all its resources, Singapore can produce either 50 telecommunications equipment, or 100 electrical circuit apparatus. Using all its resources, Indonesia can produce either 1,000 telecommunications equipment, or 5,000 circuit apparatus. (a) Which country/countries has/have the absolute advantages and the comparative advantages in the production of telecommunications equipment, and of electrical circuit apparatus? Explain and show. (b) Consider the case of constant opportunity cost. What will be the resulting patterns of trade, terms-of-trade, and the aggregate production and consumption? Provide a diagram to illustrate, with telecommunications equipment on the y-axis. (c) It is found that contrary to the above, there is no complete specialisation in both Singapore and Indonesia. Instead, Singapore partially specialises in…When a country speciallizes in the production of a good, this means that it can produce this good at a lower opportunity cost than Its trading partner. Because of this comparative advantage, both countries benefit when they specialize and trade with each other. The following graphs show the production possibilitles frontlers (PPFS) for Maldonia and Sylvanla. Both countries produce lemons and coffee, each Initlally (that is, before specialization and trade) producing 18 million pounds of lemons and 9 million pounds of coffee, as Indicated by grey points (star symbols) labeled point A. Maldonia Sylvania 48 48 42 42 36 36 PPF 30 30 24 24 18 PPF 18 12 12 6 12 18 24 30 36 42 48 12 18 24 30 36 42 48 LEMONS (Milions of pounds) LEMONS (Millions of pounds) Maldonia has a comparative advantage in the production of while Sylvania has a comparative advantage in the . If each fully specializes (that is, produces only the good for which each has a comparative production of advantage), the most the…
