Despite the absence of comparative advantage how can two countries engaged in trade will experience gain from trade. Concept Introduction: Gains from trade : The increase in welfare in the economy of the countries engaged in trade because of it.

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Answer 1

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Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

Chapter 19, Problem 1.1P

To determine

To Explain:

Despite the absence of comparative advantage how can two countries engaged in trade will experience gain from trade.

Concept Introduction:

Gains from trade: The increase in welfare in the economy of the countries engaged in trade because of it.

Expert Solution & Answer

Explanation of Solution

Comparative advantage is not the only basis of trade. There could be other reasons for which trade can take place between two countries. These include decreasing costs or increasing returns, difference in tastes or demand, economies of scale and technological changes. Therefore, even when two countries do not have comparative advantage based on any of the stated reasons, opportunities for trade can arise and they may experience gain from trade.

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Section 1 Answer all questions. Show all your workings. (a) Suppose there are two firms 1 and 2, whose abatement costs are given by c₁(e₁) and c₂ (e₂), where e denotes emissions and subscripts denote the firm. We assume that c{(e;) 0 for i = 1,2 and for any level of emission e we have c₁'(e) # c₂'(e). Furthermore, assume the two firms make different contributions towards pollution concentration in a nearby river captured by the transfer coefficients ε₁ and 2 such that for any level of emission e we have 2(e) +2 The regulator does not know the resulting C₁'(e) Τι environmental damages. Using an analytical approach explain carefully how the regulator may limit the concentration of pollution using (i) a Pigouvian tax scheme and (ii) uniform emissions standards. Discuss the cost-effectiveness of both approaches to control pollution. [200 marks] (b) "Whether the regulator sells or gives away tradeable emission permits free of charge, the quantities of emissions produced by firms are the…

Answer 2

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Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

Chapter 19, Problem 1.1P

To determine

To Explain:

Despite the absence of comparative advantage how can two countries engaged in trade will experience gain from trade.

Concept Introduction:

Gains from trade: The increase in welfare in the economy of the countries engaged in trade because of it.

Expert Solution & Answer

Explanation of Solution

Comparative advantage is not the only basis of trade. There could be other reasons for which trade can take place between two countries. These include decreasing costs or increasing returns, difference in tastes or demand, economies of scale and technological changes. Therefore, even when two countries do not have comparative advantage based on any of the stated reasons, opportunities for trade can arise and they may experience gain from trade.

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Answer 3

Question

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

Chapter 19, Problem 1.1P

To determine

To Explain:

Despite the absence of comparative advantage how can two countries engaged in trade will experience gain from trade.

Concept Introduction:

Gains from trade: The increase in welfare in the economy of the countries engaged in trade because of it.

Expert Solution & Answer

Explanation of Solution

Comparative advantage is not the only basis of trade. There could be other reasons for which trade can take place between two countries. These include decreasing costs or increasing returns, difference in tastes or demand, economies of scale and technological changes. Therefore, even when two countries do not have comparative advantage based on any of the stated reasons, opportunities for trade can arise and they may experience gain from trade.

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Answer 4

Question

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

Chapter 19, Problem 1.1P

To determine

To Explain:

Despite the absence of comparative advantage how can two countries engaged in trade will experience gain from trade.

Concept Introduction:

Gains from trade: The increase in welfare in the economy of the countries engaged in trade because of it.

Expert Solution & Answer

Explanation of Solution

Comparative advantage is not the only basis of trade. There could be other reasons for which trade can take place between two countries. These include decreasing costs or increasing returns, difference in tastes or demand, economies of scale and technological changes. Therefore, even when two countries do not have comparative advantage based on any of the stated reasons, opportunities for trade can arise and they may experience gain from trade.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 19, Problem 1.1P

To determine

To Explain:

Despite the absence of comparative advantage how can two countries engaged in trade will experience gain from trade.

Concept Introduction:

Gains from trade: The increase in welfare in the economy of the countries engaged in trade because of it.

Expert Solution & Answer

Explanation of Solution

Comparative advantage is not the only basis of trade. There could be other reasons for which trade can take place between two countries. These include decreasing costs or increasing returns, difference in tastes or demand, economies of scale and technological changes. Therefore, even when two countries do not have comparative advantage based on any of the stated reasons, opportunities for trade can arise and they may experience gain from trade.

Answer 6

Chapter 19, Problem 1.1P

To determine

To Explain:

Despite the absence of comparative advantage how can two countries engaged in trade will experience gain from trade.

Concept Introduction:

Gains from trade: The increase in welfare in the economy of the countries engaged in trade because of it.

Expert Solution & Answer

Explanation of Solution

Comparative advantage is not the only basis of trade. There could be other reasons for which trade can take place between two countries. These include decreasing costs or increasing returns, difference in tastes or demand, economies of scale and technological changes. Therefore, even when two countries do not have comparative advantage based on any of the stated reasons, opportunities for trade can arise and they may experience gain from trade.

Answer 7

Chapter 19, Problem 1.1P

To determine

To Explain:

Despite the absence of comparative advantage how can two countries engaged in trade will experience gain from trade.

Concept Introduction:

Gains from trade: The increase in welfare in the economy of the countries engaged in trade because of it.

Answer 8

Expert Solution & Answer

Explanation of Solution

Comparative advantage is not the only basis of trade. There could be other reasons for which trade can take place between two countries. These include decreasing costs or increasing returns, difference in tastes or demand, economies of scale and technological changes. Therefore, even when two countries do not have comparative advantage based on any of the stated reasons, opportunities for trade can arise and they may experience gain from trade.