Peter Pundit, an economics reporter, states that the European Union (EU) is increasing its productivity very rapidly in all industries. He claims that this productivity advance is so rapid that output from the EU in these industries will soon exceed that of the United States and, as a result, the U.S will no longer benefit from trade with the EU. (a) Whether the claim of a reporter is justified or not? (b) What type of feature do the goods have when EU and United States trade with each other. Concept Introduction: Opportunity Cost : It is the cost of next best alternative activity. For example, A farmer can produce wheat, rice, and corn in his field and earns a profit of $100, $200 and $300 per month respectively. Then farmer will choose to grow corn in his field because he will get maximum profit by growing corn. So, the opportunity cost of growing corn will be $200 because the best alternative activity is growing rice because it will give him $200 per month. Comparative Advantage : When one country produces the good at lower opportunity cost than the other country, then the country that has produced the good at lower opportunity cost is said to have a comparative advantage in the production of that good. Absolute Advantage : It refers to the ability of a country to produce the same good with same resources at lower cost.

Question

Want to see the full answer?

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 2, Problem 5P

To determine

Peter Pundit, an economics reporter, states that the European Union (EU) is increasing its productivity very rapidly in all industries. He claims that this productivity advance is so rapid that output from the EU in these industries will soon exceed that of the United States and, as a result, the U.S will no longer benefit from trade with the EU.

(a)
Whether the claim of a reporter is justified or not?
(b)
What type of feature do the goods have when EU and United States trade with each other.
Concept Introduction:

Opportunity Cost:

It is the cost of next best alternative activity. For example, A farmer can produce wheat, rice, and corn in his field and earns a profit of $100, $200 and $300 per month respectively. Then farmer will choose to grow corn in his field because he will get maximum profit by growing corn. So, the opportunity cost of growing corn will be $200 because the best alternative activity is growing rice because it will give him $200 per month.

Comparative Advantage:

When one country produces the good at lower opportunity cost than the other country, then the country that has produced the good at lower opportunity cost is said to have a comparative advantage in the production of that good.

Absolute Advantage:

It refers to the ability of a country to produce the same good with same resources at lower cost.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Put the sections of Cornell notes in the order of completion.

agree or disagree with the post Hi Class! Egyptian dates are much sweeter! Due largely to their climate and geography, Egypt, Saudi Arabia, Algeria, and Iran produce more dates than either the US or Canada. Dates grow best in hot dry climates with long dry growing seasons, which these nations naturally offer. They also produce a lot of dates because of their extensive agricultural, infrastructure, and centuries-old date-growing expertise. Conversely, the U.S., there aren't many places in Canada and California that are suitable for date farming, only a select few, like the Coachella Valley, in California can produce dates on a large scale. Although California produces some dates, it is not as much as countries like Saudi Arabia and Egypt. Depending only on U.S., because of increased labor and production costs, dates grown in this way may have a limited supply and raise prices. We can obtain a greater supply of dates at competitive prices while maintaining consistent quality by…

In 1932 babe Ruth made $75,000. How much is that in todays dollars please give the right answer step by step

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 5P

To determine

Peter Pundit, an economics reporter, states that the European Union (EU) is increasing its productivity very rapidly in all industries. He claims that this productivity advance is so rapid that output from the EU in these industries will soon exceed that of the United States and, as a result, the U.S will no longer benefit from trade with the EU.

(a)
Whether the claim of a reporter is justified or not?
(b)
What type of feature do the goods have when EU and United States trade with each other.
Concept Introduction:

Opportunity Cost:

It is the cost of next best alternative activity. For example, A farmer can produce wheat, rice, and corn in his field and earns a profit of $100, $200 and $300 per month respectively. Then farmer will choose to grow corn in his field because he will get maximum profit by growing corn. So, the opportunity cost of growing corn will be $200 because the best alternative activity is growing rice because it will give him $200 per month.

Comparative Advantage:

When one country produces the good at lower opportunity cost than the other country, then the country that has produced the good at lower opportunity cost is said to have a comparative advantage in the production of that good.

Absolute Advantage:

It refers to the ability of a country to produce the same good with same resources at lower cost.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

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 5P

To determine

Peter Pundit, an economics reporter, states that the European Union (EU) is increasing its productivity very rapidly in all industries. He claims that this productivity advance is so rapid that output from the EU in these industries will soon exceed that of the United States and, as a result, the U.S will no longer benefit from trade with the EU.

(a)
Whether the claim of a reporter is justified or not?
(b)
What type of feature do the goods have when EU and United States trade with each other.
Concept Introduction:

Opportunity Cost:

It is the cost of next best alternative activity. For example, A farmer can produce wheat, rice, and corn in his field and earns a profit of $100, $200 and $300 per month respectively. Then farmer will choose to grow corn in his field because he will get maximum profit by growing corn. So, the opportunity cost of growing corn will be $200 because the best alternative activity is growing rice because it will give him $200 per month.

Comparative Advantage:

When one country produces the good at lower opportunity cost than the other country, then the country that has produced the good at lower opportunity cost is said to have a comparative advantage in the production of that good.

Absolute Advantage:

It refers to the ability of a country to produce the same good with same resources at lower cost.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

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 5P

To determine