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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(?) (? Freedonia Desonia 64 64 56 56 48 48 PPF 40 40 32 32 24 PPF 24 16 16 A 8 8 8 16 24 32 40 48 56 64 8 16 24 32 40 48 56 64 LEMONS (Millions of pounds) LEMONS (Millions of pounds) Freedonia has a comparative advantage in the production of while Desonia has a comparative advantage in the production of Suppose that Freedonia 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 lemons and million pounds of tea. Suppose that Freedonia 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 8 million pounds of lemons for 8 million pounds of tea. This ratio of goods is known as the price of trade between Freedonia and Desonia. TEA (Millions of pounds) TEA (Millions of pounds)

(Figure: The Production Possibility Frontiers for Kansas and Wisconsin) Use Figure: The Production Possibility Frontiers for Kansas and Wisconsin. In autarky, Kansas produces and consumes 30 gallons of milk and 80 bushels of corn, while Wisconsin produces and consumes 80 gallons of milk and 60 bushels of corn. If the two states engage in trade, with each state specializing in the good in which it has a comparative advantage, world production of milk will: Kansas Wisconsin Corn (bushels) Corn (bushels) 225 225 2004 200 175 175 150 150 125 125 100 100 75 75 50 50 25 1 0 25 50 75 100 125 150 175 200 25 50 75 100 125 150 175 200 Milk (gallons) Milk (gallons) OO decrease by 30 gallons. increase by 90 gallons. increase by 120 gallons. remain constant. ॐ ४ 25 0

(Figure: The Production Possibility Frontiers for Kansas and Wisconsin) Use Figure: The Production Possibility Frontiers for Kansas and Wisconsin. In autarky, Kansas produces and consumes 30 gallons of milk and 80 bushels of corn, while Wisconsin produces and consumes 80 gallons of milk and 60 bushels of con. If the two states engage in trade, with cach state specializing in the good in which it has a comparative advantage, world production of milk will: Kansas Wisconsin Com (bushels) Corn (bushels) 225 225 200 200 175 175 150 150 125 125 100 100 75 75 50 50 25- 25- 25 50 75 100 125 150 175 200 25 50 75 100 125 150 175 200 Milk (gallons) MIlk (gallons) decrease by 30 gallons. increase by 90 gallons. increase by 120 gallons. remain constant.

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.

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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.