The difference between comparative advantage and absolute advantage .

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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 2, Problem 1RQ

To determine

The difference between comparative advantage and absolute advantage.

Expert Solution & Answer

Explanation of Solution

Comparative advantage refers the ability of a nation to produce goods and services at a lower opportunity cost than others. On the other hand, absolute advantage refers to the cost advantage of a nation, which can produce large quantity of goods and services using same level of inputs. Suppose an individual or a firm can produce a particular good at a lower cost than others can, then the individual or the firm has a comparative cost in the production of that good. In addition, if an individual or a firm can produce greater quantity of a good using less units of input than others, then the individual or firm has an absolute advantage in the production of that particular good.

Economics Concept Introduction

Absolute advantage: Absolute advantage refers to the ability to produce a good using fewer inputs than another producer does.

Comparative advantage: Comparative advantage refers to the ability to produce a good at a lower opportunity cost than another producer.

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Problem 3 You are given the following demand for European luxury automobiles: Q=1,000 P-0.5.2/1.6 where P-Price of European luxury cars PA = Price of American luxury cars P, Price of Japanese luxury cars I= Annual income of car buyers Assume that each of the coefficients is statistically significant (i.e., that they passed the t-test). On the basis of the information given, answer the following questions 1. Comment on the degree of substitutability between European and American luxury cars and between European and Japanese luxury cars. Explain some possible reasons for the results in the equation. 2. Comment on the coefficient for the income variable. Is this result what you would expect? Explain. 3. Comment on the coefficient of the European car price variable. Is that what you would expect? Explain.

Problem 2: A manufacturer of computer workstations gathered average monthly sales figures from its 56 branch offices and dealerships across the country and estimated the following demand for its product: Q=+15,000-2.80P+150A+0.3P+0.35Pm+0.2Pc (5,234) (1.29) (175) (0.12) (0.17) (0.13) R²=0.68 SER 786 F=21.25 The variables and their assumed values are P = Price of basic model = 7,000 Q==Quantity A = Advertising expenditures (in thousands) = 52 P = Average price of a personal computer = 4,000 P. Average price of a minicomputer = 15,000 Pe Average price of a leading competitor's workstation = 8,000 1. Compute the elasticities for each variable. On this basis, discuss the relative impact that each variable has on the demand. What implications do these results have for the firm's marketing and pricing policies? 2. Conduct a t-test for the statistical significance of each variable. In each case, state whether a one-tail or two-tail test is required. What difference, if any, does it make to…

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 2, Problem 1RQ

To determine

The difference between comparative advantage and absolute advantage.

Expert Solution & Answer

Explanation of Solution

Comparative advantage refers the ability of a nation to produce goods and services at a lower opportunity cost than others. On the other hand, absolute advantage refers to the cost advantage of a nation, which can produce large quantity of goods and services using same level of inputs. Suppose an individual or a firm can produce a particular good at a lower cost than others can, then the individual or the firm has a comparative cost in the production of that good. In addition, if an individual or a firm can produce greater quantity of a good using less units of input than others, then the individual or firm has an absolute advantage in the production of that particular good.

Economics Concept Introduction

Absolute advantage: Absolute advantage refers to the ability to produce a good using fewer inputs than another producer does.

Comparative advantage: Comparative advantage refers to the ability to produce a good at a lower opportunity cost than another producer.

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

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 2, Problem 1RQ

To determine

The difference between comparative advantage and absolute advantage.

Expert Solution & Answer

Explanation of Solution

Comparative advantage refers the ability of a nation to produce goods and services at a lower opportunity cost than others. On the other hand, absolute advantage refers to the cost advantage of a nation, which can produce large quantity of goods and services using same level of inputs. Suppose an individual or a firm can produce a particular good at a lower cost than others can, then the individual or the firm has a comparative cost in the production of that good. In addition, if an individual or a firm can produce greater quantity of a good using less units of input than others, then the individual or firm has an absolute advantage in the production of that particular good.

Economics Concept Introduction

Absolute advantage: Absolute advantage refers to the ability to produce a good using fewer inputs than another producer does.

Comparative advantage: Comparative advantage refers to the ability to produce a good at a lower opportunity cost than another producer.

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

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 2, Problem 1RQ

To determine

The difference between comparative advantage and absolute advantage.

Expert Solution & Answer

Explanation of Solution

Comparative advantage refers the ability of a nation to produce goods and services at a lower opportunity cost than others. On the other hand, absolute advantage refers to the cost advantage of a nation, which can produce large quantity of goods and services using same level of inputs. Suppose an individual or a firm can produce a particular good at a lower cost than others can, then the individual or the firm has a comparative cost in the production of that good. In addition, if an individual or a firm can produce greater quantity of a good using less units of input than others, then the individual or firm has an absolute advantage in the production of that particular good.

Economics Concept Introduction

Absolute advantage: Absolute advantage refers to the ability to produce a good using fewer inputs than another producer does.

Comparative advantage: Comparative advantage refers to the ability to produce a good at a lower opportunity cost than another producer.

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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 2, Problem 1RQ

To determine

The difference between comparative advantage and absolute advantage.

Expert Solution & Answer

Explanation of Solution

Comparative advantage refers the ability of a nation to produce goods and services at a lower opportunity cost than others. On the other hand, absolute advantage refers to the cost advantage of a nation, which can produce large quantity of goods and services using same level of inputs. Suppose an individual or a firm can produce a particular good at a lower cost than others can, then the individual or the firm has a comparative cost in the production of that good. In addition, if an individual or a firm can produce greater quantity of a good using less units of input than others, then the individual or firm has an absolute advantage in the production of that particular good.

Economics Concept Introduction

Absolute advantage: Absolute advantage refers to the ability to produce a good using fewer inputs than another producer does.

Comparative advantage: Comparative advantage refers to the ability to produce a good at a lower opportunity cost than another producer.

Answer 6

Chapter 2, Problem 1RQ

To determine

The difference between comparative advantage and absolute advantage.

Expert Solution & Answer

Explanation of Solution

Comparative advantage refers the ability of a nation to produce goods and services at a lower opportunity cost than others. On the other hand, absolute advantage refers to the cost advantage of a nation, which can produce large quantity of goods and services using same level of inputs. Suppose an individual or a firm can produce a particular good at a lower cost than others can, then the individual or the firm has a comparative cost in the production of that good. In addition, if an individual or a firm can produce greater quantity of a good using less units of input than others, then the individual or firm has an absolute advantage in the production of that particular good.

Economics Concept Introduction

Absolute advantage: Absolute advantage refers to the ability to produce a good using fewer inputs than another producer does.

Comparative advantage: Comparative advantage refers to the ability to produce a good at a lower opportunity cost than another producer.

Answer 7

Chapter 2, Problem 1RQ

To determine

The difference between comparative advantage and absolute advantage.

Answer 8

Expert Solution & Answer

Explanation of Solution

Comparative advantage refers the ability of a nation to produce goods and services at a lower opportunity cost than others. On the other hand, absolute advantage refers to the cost advantage of a nation, which can produce large quantity of goods and services using same level of inputs. Suppose an individual or a firm can produce a particular good at a lower cost than others can, then the individual or the firm has a comparative cost in the production of that good. In addition, if an individual or a firm can produce greater quantity of a good using less units of input than others, then the individual or firm has an absolute advantage in the production of that particular good.