Exploring Economics
8th Edition
ISBN: 9781544336329
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Question
Chapter 2, Problem 16P
To determine
The country with lower
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Why is it important that the country or region with the lower opportunity cost produce the good? How would you use the concept of comparative advantage to argue for reducing restrictions on trade between countries?
Is absolute advantage or comparative advantage more important for trade? Give an Example
Why is comparative advantage more important than absolute advantage in determining whether trade is beneficial?
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- What are the impacts of comparative advantage and absolute advantage?arrow_forwardHow is the theory of absolute advantage similar to that of comparative advantage? How is it different?arrow_forwardGive three examples of trade in servieces and explain how comparative advantage may play a role in them. Do you think there are other factors at work than comparative advantage?arrow_forward
- The principle of comparative advantage does not provide answers to certain questions. One of those questions is Do specialization and trade benefit more than one party to a trade? Is it absolute advantage or comparative advantage that really matters? How are the gains from trade shared among the parties to a trade? Is it possible for specialization and trade to increase total output of traded goods?arrow_forwardA) Which producer has the comparative advantage in producing puzzles? Geppetto or Lewis B) Which producer has the comparative advantage in producing puppets? C) If both producers decided to trade with each other to stock their toy stores, which of the following is a range of terms of trade that would benefit both Geppetto and Lewis (1 puppet = x puzzles)? Please explain to me how to solve those questions. Don't just give me the answers. Thank you so much!arrow_forwardSuppose that an hour of work in Brazil can produce 1 pound of coffee or 4 pounds of sugar. In Colombia, an hour of work produces 2 pounds of coffee or 5 pounds of sugar. Which country has the absolute advantage in coffee? In sugar? Calculate the opportunity cost of each good in each country. Which country has the comparative advantage in each good? Why? What would be a mutually beneficial terms of trade?arrow_forward
- Explain the difference between absolute and comparative advantage in relation to trade and give an example of each. How does the type of advantage influence trade between different countries? Why is trade beneficial? What happens if a government imposes tariffs on imported products?arrow_forwardIn the past, comparative advantages have sometimes shifted from one nation to another. What factors do you think caused these shifts? Why? Was there anything a nation could have done to prevent an advantage from shifting to another nation?arrow_forwardSuppose that an hour of work in Germany can produce 5 pastries or 4 sausages. In Denmark, an hour of work produces 4 pastries or 3 sausages. Which country has the absolute advantage in pastries? In sausages? Calculate the opportunity cost of each good in each country. Which country has the comparative advantage in each good? Why? What would be a mutually beneficial terms of trade?arrow_forward
- There are two countries: Country A and Country B. These countries have the same amount of resources and both produce the same two goods, pencils and markers. The opportunity cost of pencils in Country A is ½ markers per pencil and the opportunity cost of pencils in Country B is 4 markers per pencil. Which country has a comparative advantage in each good? Group of answer choices Country A has a comparative advantage in both goods Country B has a comparative advantage in both goods Country A has a comparative advantage in markers; Country B has a comparative advantage in pencils Country A has a comparative advantage in pencils; Country B has a comparative advantage in markersarrow_forwardWhat does it mean to have an absolute advantage? What does it mean to have a comparative advantage?arrow_forwardThe United States and Canada have the production possibilities curves shown above. It is determined that the United States has the comparative advantage in peanuts. Will both nations gain from trade if the terms of trade that are offered are 1 Peanut= 3 Corn? Why or why not? Show your work.arrow_forward
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