EBK MACROECONOMICS (FOURTH EDITION)
4th Edition
ISBN: 9780393616125
Author: Jones
Publisher: YUZU
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Question
Chapter 19, Problem 6E
a)
To determine
The autarky situation of the economy.
b)
To determine
The free trade situation of the economy.
c)
To determine
The
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Suppose that Vietnam has the usual demand and supply curves for producing computers while Myanmar only has a typical demand curve, but it cannot produce computers. Use the three-panel diagram described in Week 2 lecture content to: Show in a set of graphs the free-trade equilibrium for computers. Indicate the equilibrium world price. How does this world price compare to the no-trade price in Vietnam? Indicate how many computers are traded under free international trade. Make sure to state the assumptions. Show graphically and explain the effects of the shift from no trade to free trade on surpluses in each country. Indicate the net national gain or loss from no trade to free trade for each country.
Note:-
Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
Answer completely.
You will get up vote for sure.
Answer the next question(s) on the basis of the following information. Assume that by devoting all its resources to the production of X, nation
Alpha can produce 40 units of X. By devoting all its resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and
40Y.
Refer to the above information. The terms of trade will be at or within the 1X=1¹/2Y to 1X = ²/3Y range.
Select one:
True
False
Analyze the following (2x2) matrix.
Identify the countries having certain advantages.
Moreover, specify the benefits of trade for both countries.
Matrix A
Wheat (bushels/labor hour )
Cloth (yards/labor hour)
United States
6
4
U.K.
1
3
(Numerical values reflect output per unit of input)
Will trade occur? Identify the country having the absolute advantage in wheat and the one having the absolute advantage in cloth.
Identify the production possibility frontiers for both countries.
Show the gains of trade if we assume that the U.S. exchanges 6 units of wheat for 6 units of cloth.
Chapter 19 Solutions
EBK MACROECONOMICS (FOURTH EDITION)
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- Consider a simple world of 2 countries, Domestic (Dom) and Foreign (For), one good and increasing marginal costs. In autarky: Domestic: QD = 40 – 4*P, Qs = -8 + || 4*P Foreign: QD = 22 – 4*P, Qs = -2 + 8*P a) Discuss the consequences of opening to free trade b) Suppose that after opening to trade Domestic imposes a $2 tariff per unit imported. Assume that Domestic is, in this situation, "Small". Discuss the consequences of the tariff for Domestic only c)Suppose that Domestic was "Large" when it imposed the tariff. Discuss how would the consequences of the tariff be different?arrow_forwardThe following hypothetical production possibilities tables for China and Canada. Assume that, before specialization and trade, the optimal product mix for China is alternative D and for Canada is alternative S.arrow_forwardConsider a two country, two goods, one factor (labor) model of international trade. Suppose home country require 1 units of labor to produce a unit of cloth and 1 unit of labor to produce a unit of wine (regardless of output levels). Foreign country requires 2 unit of labor to produce 1 unit of cloth and 1.5 units of labor to produce 1 unit of wine (regardless of output levels). (a) Which country has the comparative advantage in producing wine? Justify your answer. (b) Which country has the absolute advantage in producing wine? (c) Which country will have higher autarky price of wine in terms of cloth? (d) Suppose after trade, the international relative price settles at a level strictly between the autarky relative prices of the two countries. At the trade equilibrium, show which country will produce wine and which country will produce cloth.arrow_forward
- The table below for the United States and Mexico shows maximum feasible production rates per acre of wheat if no rice is produced and maximum feasible production rates per acre of rice if no wheat are produced. Assume that the opportunity costs of producing these goods are constant in both countries. Output per Acre with Trade Wheat 80 tons United States Mexico 55 tons For the United States, the opportunity cost of 1 ton of wheat is tons of rice. (Enter your response rounded to two decimal places.) has a comparative advantage in wheat, and has a comparative advantage in rice. Now consider the following table that shows the production and consumption of wheat and rice if there is no trade. Output per Acre with No Trade Wheat 40.0 tons 27.5 tons United States Mexico Total output of wheat if the two countries do not trade tons. (Enter your response rounded to one decimal place.) Total output of rice if the two countries do not trade tons. (Enter your response rounded to one decimal place)…arrow_forwardComparative advantage and gains from trade Consider two neighboring island countries called Bellissima and Felicidad. They each have 4 million labor hours available per month that they can use to produce corn, jeans, or a combination of both. The following table shows the amount of corn or jeans that can be produced using 1 hour of labor. Corn Jeans Country (Bushels per hour of labor) (Pairs per hour of labor) Bellissima 8 16 Felicidad 5 20 Initially, suppose Bellissima uses 1 million hours of labor per month to produce corn and 3 million hours per month to produce jeans, while Felicidad uses 3 million hours of labor per month to produce corn and 1 million hours per month to produce jeans. Consequently, Bellissima produces 8 million bushels of corn and 48 million pairs of jeans, and Felicidad produces 15 million bushels of corn and 20 million pairs of jeans. Assume there are no other countries willing to trade goods, so in the absence of trade between…arrow_forwardQuestion 1: Assume there are two nations: Panama and Guatemala that produce two commodities: coconuts and passion fruits. The table below contains the amount of each commodity produced per hour of labour in the two nations in terms of Kg. Panama Guatemala Passion fruits 9 4 Соconuts 6. c) Suppose passion fruits and coconuts are exchanged internationally at a rate of 1.2 passion fruit per coconut. Which country will export coconuts and why? Assuming both countries have 180 hours of labour each, draw the PPFS of both countries to your answer and explain why both countries are better off after trade. illustrate d) Draw the world supply curve of coconuts.arrow_forward
- Questions 12-15 refer to the simple (free) trade model graph of country A on the right that shows what happens to welfare of consumers, producers, and total, when country A opens its border to trade. The domestic price and world price are Pp and Pw, respectively. The equilibrium quantity under autarky (no trade) is Qp. After trade, domestic producers supply Qa and (Qw Qa) is imported from the rest of the world. Domestic Supply (S) Price (in US $) ↑ G PD H Pw Export Supply K Domestic Demand (D) 12. What is the gain in consumers' surplus (CS) after free trade? [Select one] а. Н Qa QD Qw Quantity b. I+J с. Н+1+] d. H +I+J+ K 13. What is the gain in total welfare (CS+PS) after free trade? [Select one] а. Н b. I+J с. Н +1+] d. H +1+J+ K 14. Fill in the blanks: "Due to free trade, gain welfare and lose welfare, respectively. a. consumers, producers b. producers, government c. consumers, government d. government, producers 15. What is the minimum "area" of surplus that needs to be transferred…arrow_forward# Module Two Quiz 3. Gains from trade Suppose there exist two imaginary countries, Glacier and Sequoia. Their labor forces are each capable of supplying four million hours per day that can be used to produce = pistachios, chinos, or some combination of the two. The following table shows the amount of pistachios or chinos that can be produced by one hour of labor. € Pistachios Chinos Country (Pounds per hour of labor) (Pairs per hour of labor) 24 Glacier Sequoia 32 X 12 8 Suppose that initially Glacier uses 1 million hours of labor day to produce pistachios and 3 million hours per day to produce chinos, while Sequoia uses 3 million hours of lab per day to produce pistachios and 1 million hours per day produce chinos. As a result, Glacier produces 12 million pounds of pistachios and 72 million pairs of chinos, and Sequoia produces 24 million pounds of pistachios and 32 million pairs of chinos. Assume there are no other countrie willing to engage in trade, so, in the absence of trade betw…arrow_forwardConsider the market for meekers in the imaginary economy of Meekertown. In the absence of international trade, the domestic price of meekers is $30. Suppose that the world price of meekers is $40. Assume that Meekertown is too small to influence the world price of meekers once it enters the international market. If Meekertown allows free trade, then it will meekers. Given current economic conditions in Meekertown, complete the following table by indicating whether each of the statements is true or false. Statement True False Meekertownian consumers are worse off under free trade than they were before. Meekertownian producers were better off without free trade than they are with it. True or False: When a country is too small to affect the world price, allowing free trade will have a non-negative effect on total surplus in that country, regardless of whether it imports or exports as a result of international trade. O True Falsearrow_forward
- Suppose that Country A can produce 6060 bags of sugar or 3030 bags of flour per worker hour. Country B can produce 4040 bags of sugar or 1010 bags of flour per worker hour. Assume that there is 100%100% specialization, and each country has 55 worker hours.If each country specializes in its comparative advantage, calculate the quantity of the good that Country B should produce.arrow_forwardConsider the market for meekers in the imaginary economy of Meekertown. In the absence of international trade, the domestic price of meekers is $22. Suppose that the world price of meekers is $21. Assume that Meekertown is too small to influence the world price of meekers once it enters the international market. If Meekertown allows free trade, then it will meekers. Given current economic conditions in Meekertown, complete the following table by indicating whether each of the statements is true or false. Statement True False Meekertownian consumers are worse off under free trade than they were before. Meekertownian producers were worse off without free trade than they are with it. True or False: When a country is too small to affect the world price, allowing free trade will never increase total surplus in that country, regardless of whether it imports or exports as a result of international trade. True Falsearrow_forwardTwo countries, Home (H) and Foreign (F) trade agricultural and manufacturing goods (A and M, respectively). Production of either good requires skilled and unskilled labor. Unskilled workers can freely move from one sector to another, while skilled workers cannot. Identify mobile and industry-specific factors of production (b) Suppose Home is relatively more productive in agriculture than Foreign. Draw two diagrams, one for H one for F, which illustrate no-trade equilibrium in each county. Compare relative price of agricultural goods in two countries.arrow_forward
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