Question 1 Table 1 illustrates the supply and demand schedules for cheeses in Sweden and Norway. On graph paper, draw the supply and demand schedules for each country. a. In the absence of trade, what are the equilibrium price and quantity of cheeses produced in Sweden and Norway? Which country has the comparative advantage in cheeses? b. Assume there are no transportation costs. With trade, what price brings about balance in exports and imports? How many cheeses are traded at this price? How many cheeses are produced and consumed in each country with trade? c. Suppose the cost of transporting each cheese from Sweden to Norway is $5. With trade, what is the impact of the transportation cost on the price of the traded product in each trading nation? The extent of specialization? The volume of trade? Table 1 Price 5 10 15 20 25 30 35 40 45 Sweden Quantity Supplied Quantity Demanded 200 400 600 800 1,000 1,200 1,400 1,600 1,800 1,200 1,000 800 600 400 200 Price 5 10 15 20 25 30 35 40 45 Norway Quantity Supplied Quantity Demanded 200 400 600 800 1,000 1,200 1,800 1,600 1,400 1,200 1,000 800 600 400 200

Question 1 Table 1 illustrates the supply and demand schedules for cheeses in Sweden and Norway. On graph paper, draw the supply and demand schedules for each country. a. In the absence of trade, what are the equilibrium price and quantity of cheeses produced in Sweden and Norway? Which country has the comparative advantage in cheeses? b. Assume there are no transportation costs. With trade, what price brings about balance in exports and imports? How many cheeses are traded at this price? How many cheeses are produced and consumed in each country with trade? c. Suppose the cost of transporting each cheese from Sweden to Norway is $5. With trade, what is the impact of the transportation cost on the price of the traded product in each trading nation? The extent of specialization? The volume of trade? Table 1 Price 5 10 15 20 25 30 35 40 45 Sweden Quantity Supplied Quantity Demanded 200 400 600 800 1,000 1,200 1,400 1,600 1,800 1,200 1,000 800 600 400 200 Price 5 10 15 20 25 30 35 40 45 Norway Quantity Supplied Quantity Demanded 200 400 600 800 1,000 1,200 1,800 1,600 1,400 1,200 1,000 800 600 400 200

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Table of Contents Section 5- International Trade Dropbox Question 7 Dropbox Question 7 Dropbox Question 7 1. Make the case in favor of international trade based on comparative advantage. 2. Who are the winners and who are the losers when tariffs or quotas are implemented? 3. Make the case for restricting international trade. Explain your answers thoroughly Submit Dropbox Question 7 Download Reflect in ePortfolio Print
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