Microeconomics
13th Edition
ISBN: 9781337617406
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 2, Problem 9WNG
To determine
Explain who has the
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Consider a hypothetical world with two countries: Country A and Country B. Each country has 45 workers, who produce cars and bicycles. If Country A shifts all its workers to one good, it can produce 1,350 cars or 2,520 bicycles. Under the same conditions, Country B can produce 1,710 cars or 2,880 bicycles. Therefore, Country B has an absolute advantage in producing both goods. Nevertheless, the two countries decide to trade, so each shift production to their areas of comparative advantage.
Determine which good Country A will specialize in. Then, calculate the quantity of this good the country will produce after trade if only 40 workers are involved. If necessary, round any intermediate calculations to two decimal places and your final answer to the nearest whole number.
When a country has a comparative advantage in the production of a good, it means that it can produce this good at a lower opportunity cost than its trading partner. Then the country will specialize in the production of this good and trade it for other goods.
The following graphs show the production possibilities frontiers (PPFs) for Candonia and Lamponia. Both countries produce potatoes and sugar, each initially (i.e., before specialization and trade) producing 24 million pounds of potatoes and 12 million pounds of sugar, as indicated by the grey stars marked with the letter A.
* FIRST PICTURE HERE
Candonia has a comparative advantage in the production of , while Lamponia has a comparative advantage in the production of . Suppose that Candonia and Lamponia specialize in the production of the goods in which each has a comparative advantage. After specialization, the two countries can produce a total of -- million pounds of potatoes and -- million pounds of sugar.
Suppose…
Two countries, Alpha and Beta consider the construction of a bridge across a river that separates them. The bridge would increase commerce and trade in both countries. If they both contribute to the building of this bridge, then each receive a profit of $32 million. However, if they both fail to contribute, they are each left with a profit of just $30 million. If one country contributes and the other one does not, then the country that does not contribute is a “free rider” and will receive a profit of $35 million. The contributing player spends a lot of money building the bridge and is left with a profit of only $28 million.
5.1. Fill out the payoff matrix (below) for the game by including all the elements (players, their strategies, and their payoffs).
5.2. Assume the players do not cooperate. Solve the game for the Nash equilibrium (find out the strategy played by each player in equilibrium). What is the payoff each gets…
Chapter 2 Solutions
Microeconomics
Ch. 2.1 - Prob. 1STCh. 2.1 - Prob. 2STCh. 2.1 - Prob. 3STCh. 2.1 - Prob. 4STCh. 2 - Prob. 1QPCh. 2 - Prob. 2QPCh. 2 - Prob. 3QPCh. 2 - Prob. 4QPCh. 2 - Prob. 5QPCh. 2 - Prob. 6QP
Ch. 2 - Prob. 7QPCh. 2 - Prob. 8QPCh. 2 - Prob. 9QPCh. 2 - Prob. 10QPCh. 2 - Prob. 11QPCh. 2 - Prob. 12QPCh. 2 - Prob. 13QPCh. 2 - Prob. 1WNGCh. 2 - Prob. 2WNGCh. 2 - Prob. 3WNGCh. 2 - Prob. 4WNGCh. 2 - Prob. 5WNGCh. 2 - Prob. 6WNGCh. 2 - Prob. 7WNGCh. 2 - Prob. 8WNGCh. 2 - Prob. 9WNGCh. 2 - Prob. 10WNGCh. 2 - Prob. 11WNGCh. 2 - Prob. 12WNG
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- When a country has a comparative advantage in the production of a good, it means that it can produce this good at a lower opportunity cost than its trading partner. Then the country will specialize in the production of this good and trade it for other goods. The following graphs show the production possibilities frontiers (PPFS) for Candonia and Lamponia. Both countries produce grain and sugar, each initially (i.e., before specialization and trade) producing 24 million pounds of grain and 12 million pounds of sugar, as indicated by the grey stars marked with the letter A. SUGAR (Millions of pounds) 64 56 48 PPF 40 32 24 16 8 0 0 8 Candonia 16 24 32 40 48 GRAIN (Millions of pounds) 56 64 (?) SUGAR (Millions of pounds) 64 56 48 40 32 24 16 8 0 PPF ———— 0 8 Lamponia A 16 24 32 40 48 GRAIN (Millions of pounds) 56 64 ? Candonia has a comparative advantage in the production of sugar while Lamponia has a comparative advantage in the grain production of ▼ . Suppose that Candonia and Lamponia…arrow_forwardA country may specialize in the production of a good that it can produce at a lower opportunity cost than its trading partners. Because of this comparative advantage, countries benefit when they specialize and trade with each other. The following graphs show the production possibilities curves (PPCs) for Freedonia and Sylvania. Both countries produce grain and tea, each initially (i.e., before specialization and trade) producing 24 million pounds of grain and 12 million pounds of tea, as indicated by the grey stars marked with the letter A. Freedonia has a comparative advantage in the production of , while Sylvania has a comparative advantage in the production of . Suppose that Freedonia and Sylvania specialize in the production of the goods in which each has a comparative advantage. After specialization, the two countries can produce a total of million pounds of tea and million pounds of grain. Suppose that Freedonia and Sylvania agree to trade. Each country focuses its…arrow_forwardWhen a country specializes in the production of a good, this means that it can produce this good at a lower opportunity cost than its trading partner. Because of this comparative advantage, both countries benefit when they specialize and trade with each other. The following graphs show the production possibilities frontiers (PPFS) for Freedonia and Sylvania. Both countries produce lemons and sugar, each initially (i.e., before specialization and trade) producing 24 million pounds of lemons and 12 million pounds of sugar, as indicated by the grey stars marked with the letter A. SUGAR (Millions of pounds) 64 56 48 40 32 24 16 8 0 0 PPF 1 Freedonia 24, 12 8 16 24 32 40 48 LEMONS (Millions of pounds) 56 64 (?) SUGAR (Millions of pounds) 64 56 48 40 32 24 16 8 0 PPF 0 8 Sylvania A 16 24 32 40 48 56 64 LEMONS (Millions of pounds) (?) Freedonia has a comparative advantage in the production of while Sylvania has a comparative advantage in the production of . Suppose that Freedonia and Sylvania…arrow_forward
- When a country has a comparative advantage in the production of a good, it means that it can produce this good at a lower opportunity cost than its trading partner. Then the country will specialize in the production of this good and trade it for other goods. The following graphs show the production possibilities frontiers (PPFS) for Maldonia and Desonia. Both countries produce lemons and tea, each initially (i.e., before specialization and trade) producing 24 million pounds of lemons and 12 million pounds of tea, as indicated by the grey stars marked with the letter A. (2 Maldonia Desonia 64 64 56 56 48 PPF 48 40 40 32 32 24 24 PPF 16 16 8 8 8 16 24 32 40 48 56 64 8 16 24 32 40 48 56 64 LEMONS (Millions of pounds) LEMONS (Millions of pounds) TEA (Millions of pounds) TEA (Millions of pounds)arrow_forwardWhen a country specializes in the production of a good, this means that it can produce this good at a lower opportunity cost than its trading partner. Because of this comparative advantage, both countries benefit when they specialize and trade with each other. The following graphs show the production possibilities frontiers (PPFS) for Freedonia and Lamponia. Both countries produce lemons and sugar, each initially (that is, before specialization and trade) producing 12 million pounds of lemons and 6 million pounds of sugar, as indicated by grey points (star symbols) labeled point A. 12 28 24 12 Freedonia has a comparative advantage in the production of production of B (spuned to cons 4 24 advantage), the most the two countries can produce is 0 20 12 16 28 O 12 8 Note: Dashed drop lines will automatically extend to both axes. 20 0 0 PPF 24 PPF 4 Suppose that Freedonia and Lamponia specialize and open up to international trade, and the terms of trade in the world market are 1 pound of…arrow_forwardWhen a country has a comparative advantage in the production of a good, it means that it can produce this good at a lower opportunity cost than its trading partner. Then the country will specialize in the production of this good and trade it for other goods. The following graphs show the production possibilities frontiers (PPFs) for Maldonia and Desonia. Both countries produce grain and sugar, each initially (i.e., before specialization and trade) producing 18 million pounds of grain and 9 million pounds of sugar, as indicated by the grey stars marked with the letter A. Maldonia has a comparative advantage in the production of (GRAIN, SUGAR, NEITHER GRAIN OR SUGAR, BOTH GRAIN AND SUGAR) , while Desonia has a comparative advantage in the production of (GRAIN, SUGAR, NEITHER GRAIN OR SUGAR, BOTH GRAIN AND SUGAR) . Suppose that Maldonia and Desonia specialize in the production of the goods in which each has a comparative advantage. After specialization, the two…arrow_forward
- When a country specializes in the production of a good, this means that it can produce this good at a lower opportunity cost than its trading partner. Because of this comparative advantage, both countries benefit when they specialize and trade with each other. The following graphs show the production possibilities frontiers (PPFS) for Freedonia and Sylvania. Both countries produce potatoes and tea, each initially (i.e., before specialization and trade) producing 12 million pounds of potatoes and 6 million pounds of tea, as indicated by the grey stars marked with the letter A. Freedonia Sylvania 32 32 28 28 24 PPF 24 20 20 16 16 12 12 PPF 8 8 4 4 4 8 12 16 20 24 28 32 4 8 12 16 20 24 28 32 POTATOES (Millions of pounds) POTATOES (Millions of pounds) Freedonia has a comparative advantage in the production of while Sylvania has a comparative advantage in the production of Suppose that Freedonia and Sylvania specialize in the production of the goods in which each has a comparative…arrow_forwardWhen a country specializes in the production of a good, this means that it can produce this good at a lower opportunity cost than its trading partner. Because of this comparative advantage, both countries benefit when they specialize and trade with each other. The following graphs show the production possibilities frontiers (PPFS) for Maldonia and Lamponia. Both countries produce lemons and sugar, each initially (i.e., before specialization and trade) producing 24 million pounds of lemons and 12 million pounds of sugar, as indicated by the grey stars marked with the letter A. (? (?) Maldonia Lamponia 64 64 56 56 48 PPF 48 40 40 32 32 24 24 PPF 16 16 16 24 32 40 48 56 64 16 24 32 40 48 56 64 LEMONS (Millions of pounds) LEMONS (Millions of pounds) Maldonia has a comparative advantage in the production of production of while Lamponia has a comparative advantage in the . Suppose that Maldonia and Lamponia specialize in the production of the goods in which each has a comparative advantage.…arrow_forwardUnsure how to solvearrow_forward
- A country may specialize in the production of a good that it can produce at a lower opportunity cost than its trading partners. Because of this comparative advantage, countries benefit when they specialize and trade with each other. The following graphs show the production possibilities curves (PPCs) for Candonia and Lamponia. Both countries produce grain and coffee, each initially (i.e., before specialization and trade) producing 12 million pounds of grain and 6 million pounds of coffee, as indicated by the grey stars marked with the letter A. 32 28 B COFFEE (Millions of pounds) 24 16 12 0 PPC 14 Candonia A 8 24 12 16 20 GRAIN (Millions of pounds) 28 32 ? COFFEE (Millions of pounds) 32 28 24 20 16 12 4 0 10 PPC 4 Lamponia A 4 11 8 12 16 20 24 GRAIN (Millions of pounds) 26 32 ?arrow_forwardWhen a country has a comparative advantage in the production of a good, it means that it can produce this good at a lower opportunity cost than its trading partner. Then the country will specialize in the production of this good and trade it for other goods. The following graphs show the production possibilities frontiers (PPFS) for Shenandoah and Rainier. Both countries produce corn and basil, each initially (i.e., before specialization and trade) producing 6 million pounds of corn and 3 million pounds of basil, as indicated by the grey stars marked with the letter A. BASIL (Millions of pounds) BASIL (Millions of pounds) 16 0 16 0 14 PPF 12 2 Shenandoah 4 10 12 CORN (Millions of pounds) PPF 2 6 Note: Dashed drop lines will automatically extend to both axes. 4 14 16 Shenandoah has a comparative advantage in the production of production of . Suppose that Shenandoah and Rainier specialize comparative advantage. After specialization, the two countries can produce a total of basil.…arrow_forwardThere are two countries in the world, A and B, which trade only two goods, shirts and pants. Under autarky, shirts are cheaper in Country A than in Country B, whereas the pants are more expensive in Country A. Suppose that the world price of shirts lies above the two countries' autarky prices. BothCountry A and Country B will only produce shirts when the opportunity to trade exists.Answer true, false, or uncertain. Please briefly explain your answerarrow_forward
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