While different natural resources and the theory of comparative advantage can explain many trade patterns, they cannot explain all types of trade that economists observe. Consider each scenario in the following table and determine which theory best explains the trade pattern described. Dynamic Comparative Advantage Product Life Cycle Theory Intra-Industry Specialization Scenario For many years, microchip firms in the nation of Tablon have struggled with high production costs compared to firms in the nation of Ghovia, because Tablon's soldering tools are outdated, forcing workers to work slowly. As a result, most microchips are made in Ghovia and exported. An inventor employed by a firm in Tablon comes up with a new way to solder chips that makes workers 40% more efficient. This innovation reduces costs and allows the firms in Tablon to take over the microchip market. In response, firms in Ghovia start to research how they can update their factories to be more cost effective. In the nation of Pescovia, the fishing industry has suffered when trying to compete internationally because many of the Pescovians who are capable of fishing successfully chose to pursue more stable jobs as computer programmers. The Pescovian government passed a law to grant full health insurance to all Pescovian fisherfolk. In response, many of ㅇ the skilled Pescovians chose to abandon their jobs programming and began to fish. As the fishing industry grew, thanks to an influx of skilled fisherfolks, Pescovia became a major international exporter of fish. Nekopia and Julerton both produce silver jewelry, but because of their native ancestry, they create different designs on their jewelry. Residents of both countries like to accessorize with a variety of jewelry designs, so both countries are able to export silver jewelry.
While different natural resources and the theory of comparative advantage can explain many trade patterns, they cannot explain all types of trade that economists observe. Consider each scenario in the following table and determine which theory best explains the trade pattern described. Dynamic Comparative Advantage Product Life Cycle Theory Intra-Industry Specialization Scenario For many years, microchip firms in the nation of Tablon have struggled with high production costs compared to firms in the nation of Ghovia, because Tablon's soldering tools are outdated, forcing workers to work slowly. As a result, most microchips are made in Ghovia and exported. An inventor employed by a firm in Tablon comes up with a new way to solder chips that makes workers 40% more efficient. This innovation reduces costs and allows the firms in Tablon to take over the microchip market. In response, firms in Ghovia start to research how they can update their factories to be more cost effective. In the nation of Pescovia, the fishing industry has suffered when trying to compete internationally because many of the Pescovians who are capable of fishing successfully chose to pursue more stable jobs as computer programmers. The Pescovian government passed a law to grant full health insurance to all Pescovian fisherfolk. In response, many of ㅇ the skilled Pescovians chose to abandon their jobs programming and began to fish. As the fishing industry grew, thanks to an influx of skilled fisherfolks, Pescovia became a major international exporter of fish. Nekopia and Julerton both produce silver jewelry, but because of their native ancestry, they create different designs on their jewelry. Residents of both countries like to accessorize with a variety of jewelry designs, so both countries are able to export silver jewelry.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:While different natural resources and the theory of comparative advantage can explain many trade patterns, they cannot explain all types of trade
that economists observe.
Consider each scenario in the following table and determine which theory best explains the trade pattern described.
Dynamic
Comparative
Advantage
Product
Life Cycle
Theory
Intra-Industry
Specialization
Scenario
For many years, microchip firms in the nation of Tablon have struggled with high
production costs compared to firms in the nation of Ghovia, because Tablon's soldering
tools are outdated, forcing workers to work slowly. As a result, most microchips are made
in Ghovia and exported. An inventor employed by a firm in Tablon comes up with a new
way to solder chips that makes workers 40% more efficient. This innovation reduces costs
and allows the firms in Tablon to take over the microchip market. In response, firms in
Ghovia start to research how they can update their factories to be more cost effective.
In the nation of Pescovia, the fishing industry has suffered when trying to compete
internationally because many of the Pescovians who are capable of fishing successfully
chose to pursue more stable jobs as computer programmers. The Pescovian government
passed a law to grant full health insurance to all Pescovian fisherfolk. In response, many of
the skilled Pescovians chose to abandon their jobs programming and began to fish. As the
fishing industry grew, thanks to an influx of skilled fisherfolks, Pescovia became a major
international exporter of fish.
Nekopia and Julerton both produce silver jewelry, but because of their native ancestry,
they create different designs on their jewelry. Residents of both countries like to
ㅇ
accessorize with a variety of jewelry designs, so both countries are able to export silver
jewelry.
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