The reason of absolute advantage for U.S in both goods and the country that enjoys a comparative advantage in food. Concept Introduction Absolute advantage : It is the advantage of a country to produce a good or service at a per unit cost that is lower than that of another country that produces the same good or service. Comparative advantage : It is the ability of a country to produce goods and services at an opportunity cost that is lower as compared to other countries.

Question

Greece and Italy both produce olive oil and cheese. With the same amount of labour Greece produces 15,000 tonnes of cheese per year and 12,000 barrels of olive oil and Italy produces 25,000 tonnes of cheese and 15,000 barrels of olive oil. Determine and explain the comparative advantage for each country. (Show your working)

Answer 1

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 1.2P

To determine

The reason of absolute advantage for U.S in both goods and the country that enjoys a comparative advantage in food.

Concept Introduction

Absolute advantage: It is the advantage of a country to produce a good or service at a per unit cost that is lower than that of another country that produces the same good or service.

Comparative advantage: It is the ability of a country to produce goods and services at an opportunity cost that is lower as compared to other countries.

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Greece and Italy both produce olive oil and cheese. With the same amount of labour Greece produces 15,000 tonnes of cheese per year and 12,000 barrels of olive oil and Italy produces 25,000 tonnes of cheese and 15,000 barrels of olive oil. Determine and explain the comparative advantage for each country. (Show your working)

(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

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 1.2P

To determine

The reason of absolute advantage for U.S in both goods and the country that enjoys a comparative advantage in food.

Concept Introduction

Absolute advantage: It is the advantage of a country to produce a good or service at a per unit cost that is lower than that of another country that produces the same good or service.

Comparative advantage: It is the ability of a country to produce goods and services at an opportunity cost that is lower as compared to other countries.

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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 1.2P

To determine

The reason of absolute advantage for U.S in both goods and the country that enjoys a comparative advantage in food.

Concept Introduction

Absolute advantage: It is the advantage of a country to produce a good or service at a per unit cost that is lower than that of another country that produces the same good or service.

Comparative advantage: It is the ability of a country to produce goods and services at an opportunity cost that is lower as compared to other countries.

Expert Solution & Answer

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See solution

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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 1.2P

To determine