Identify the opportunity cost of production of each goods and comparative advantage of each country.

Question

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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 20, Problem 1VQP

To determine

Identify the opportunity cost of production of each goods and comparative advantage of each country.

Expert Solution & Answer

Explanation of Solution

The production of countries A and B is shown in the table below:

Table 1

Country

Commodity X

Commodity Y

A

10

20

1X= 2Y

1Y= .5X

B

30

40

1X= 1.33Y

1Y= .75X

According to the table, Country A requires less labor hour for both X and Y. 1 unit of X is produced with the help of 10 labor hour. As given above, 30 labor hours are required in Country B. in the case of commodity Y Country A requires 20 hours and country B requires 40 hours. Country A requires less labor hours to produce Y than B. According to the theory of comparative advantage, Country A has advantage in both goods. But it makes trade on Commodity X because it has maximum advantage on Commodity X and Country B also makes trade on Commodity X because it has minimum disadvantage in commodity.

Economics Concept Introduction

Comparative advantage: Country can go with trade with a good, which has the highest comparative advantage or lowest comparative disadvantage (lowest opportunity cost).

Opportunity cost: Opportunity cost is a loss of a good opportunity when the other one is chosen.

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1. The IS/MP model assumes that the Fed sets the real interest rate at a given level Rt. Suppose the Fed adopts a monetary policy rule that instructs it how to change the real interest rate in response to short-run output. Let's call this a monetary policy rule (MPR): The parameter x is positive. Rt=+xY a) Redraw the IS/MP diagram replacing the MP curve with the MPR curve. Show how an aggregate demand shock affects output and interest rates in the short run. Use the IS and MPR equations to solve for the changes in output and the real interest rate. b) How does the change in a affect investment in the IS/MPR model? Explain how a tax cut affects short-run output and investment in this version of the short-run model. The effect on investment is called crowding out. c) Add the Phillips curve to complete the short-run model. Illustrate how the Fed's choice of large it makes reveals its trade off between inflation and output in the short run.

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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 20, Problem 1VQP

To determine

Identify the opportunity cost of production of each goods and comparative advantage of each country.

Expert Solution & Answer

Explanation of Solution

The production of countries A and B is shown in the table below:

Table 1

Country

Commodity X

Commodity Y

A

10

20

1X= 2Y

1Y= .5X

B

30

40

1X= 1.33Y

1Y= .75X

According to the table, Country A requires less labor hour for both X and Y. 1 unit of X is produced with the help of 10 labor hour. As given above, 30 labor hours are required in Country B. in the case of commodity Y Country A requires 20 hours and country B requires 40 hours. Country A requires less labor hours to produce Y than B. According to the theory of comparative advantage, Country A has advantage in both goods. But it makes trade on Commodity X because it has maximum advantage on Commodity X and Country B also makes trade on Commodity X because it has minimum disadvantage in commodity.

Economics Concept Introduction

Comparative advantage: Country can go with trade with a good, which has the highest comparative advantage or lowest comparative disadvantage (lowest opportunity cost).

Opportunity cost: Opportunity cost is a loss of a good opportunity when the other one is chosen.

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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 20, Problem 1VQP

To determine

Identify the opportunity cost of production of each goods and comparative advantage of each country.

Expert Solution & Answer

Explanation of Solution

The production of countries A and B is shown in the table below:

Table 1

Country

Commodity X

Commodity Y

A

10

20

1X= 2Y

1Y= .5X

B

30

40

1X= 1.33Y

1Y= .75X

According to the table, Country A requires less labor hour for both X and Y. 1 unit of X is produced with the help of 10 labor hour. As given above, 30 labor hours are required in Country B. in the case of commodity Y Country A requires 20 hours and country B requires 40 hours. Country A requires less labor hours to produce Y than B. According to the theory of comparative advantage, Country A has advantage in both goods. But it makes trade on Commodity X because it has maximum advantage on Commodity X and Country B also makes trade on Commodity X because it has minimum disadvantage in commodity.

Economics Concept Introduction

Comparative advantage: Country can go with trade with a good, which has the highest comparative advantage or lowest comparative disadvantage (lowest opportunity cost).

Opportunity cost: Opportunity cost is a loss of a good opportunity when the other one is chosen.

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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 20, Problem 1VQP

To determine

Identify the opportunity cost of production of each goods and comparative advantage of each country.

Expert Solution & Answer

Explanation of Solution

The production of countries A and B is shown in the table below:

Table 1

Country

Commodity X

Commodity Y

A

10

20

1X= 2Y

1Y= .5X

B

30

40

1X= 1.33Y

1Y= .75X

According to the table, Country A requires less labor hour for both X and Y. 1 unit of X is produced with the help of 10 labor hour. As given above, 30 labor hours are required in Country B. in the case of commodity Y Country A requires 20 hours and country B requires 40 hours. Country A requires less labor hours to produce Y than B. According to the theory of comparative advantage, Country A has advantage in both goods. But it makes trade on Commodity X because it has maximum advantage on Commodity X and Country B also makes trade on Commodity X because it has minimum disadvantage in commodity.

Economics Concept Introduction

Comparative advantage: Country can go with trade with a good, which has the highest comparative advantage or lowest comparative disadvantage (lowest opportunity cost).

Opportunity cost: Opportunity cost is a loss of a good opportunity when the other one is chosen.

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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 20, Problem 1VQP

To determine

Identify the opportunity cost of production of each goods and comparative advantage of each country.

Expert Solution & Answer

Explanation of Solution

The production of countries A and B is shown in the table below:

Table 1

Country

Commodity X

Commodity Y

A

10

20

1X= 2Y

1Y= .5X

B

30

40

1X= 1.33Y

1Y= .75X

According to the table, Country A requires less labor hour for both X and Y. 1 unit of X is produced with the help of 10 labor hour. As given above, 30 labor hours are required in Country B. in the case of commodity Y Country A requires 20 hours and country B requires 40 hours. Country A requires less labor hours to produce Y than B. According to the theory of comparative advantage, Country A has advantage in both goods. But it makes trade on Commodity X because it has maximum advantage on Commodity X and Country B also makes trade on Commodity X because it has minimum disadvantage in commodity.

Economics Concept Introduction

Comparative advantage: Country can go with trade with a good, which has the highest comparative advantage or lowest comparative disadvantage (lowest opportunity cost).

Opportunity cost: Opportunity cost is a loss of a good opportunity when the other one is chosen.

Answer 6

Chapter 20, Problem 1VQP

To determine

Identify the opportunity cost of production of each goods and comparative advantage of each country.

Expert Solution & Answer

Explanation of Solution

The production of countries A and B is shown in the table below:

Table 1

Country

Commodity X

Commodity Y

A

10

20

1X= 2Y

1Y= .5X

B

30

40

1X= 1.33Y

1Y= .75X

According to the table, Country A requires less labor hour for both X and Y. 1 unit of X is produced with the help of 10 labor hour. As given above, 30 labor hours are required in Country B. in the case of commodity Y Country A requires 20 hours and country B requires 40 hours. Country A requires less labor hours to produce Y than B. According to the theory of comparative advantage, Country A has advantage in both goods. But it makes trade on Commodity X because it has maximum advantage on Commodity X and Country B also makes trade on Commodity X because it has minimum disadvantage in commodity.

Economics Concept Introduction

Comparative advantage: Country can go with trade with a good, which has the highest comparative advantage or lowest comparative disadvantage (lowest opportunity cost).

Opportunity cost: Opportunity cost is a loss of a good opportunity when the other one is chosen.

Answer 7

Chapter 20, Problem 1VQP

To determine

Identify the opportunity cost of production of each goods and comparative advantage of each country.

Answer 8

Expert Solution & Answer

Explanation of Solution

The production of countries A and B is shown in the table below:

Table 1

Country

Commodity X

Commodity Y

A

10

20

1X= 2Y

1Y= .5X

B

30

40

1X= 1.33Y

1Y= .75X

According to the table, Country A requires less labor hour for both X and Y. 1 unit of X is produced with the help of 10 labor hour. As given above, 30 labor hours are required in Country B. in the case of commodity Y Country A requires 20 hours and country B requires 40 hours. Country A requires less labor hours to produce Y than B. According to the theory of comparative advantage, Country A has advantage in both goods. But it makes trade on Commodity X because it has maximum advantage on Commodity X and Country B also makes trade on Commodity X because it has minimum disadvantage in commodity.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Economics Concept Introduction

Comparative advantage: Country can go with trade with a good, which has the highest comparative advantage or lowest comparative disadvantage (lowest opportunity cost).

Opportunity cost: Opportunity cost is a loss of a good opportunity when the other one is chosen.

Answer 12

Ch. 20.1 - Prob. 1ST Ch. 20.1 - Prob. 2ST Ch. 20.1 - Prob. 3ST Ch. 20.2 - Prob. 1ST Ch. 20.2 - Prob. 2ST Ch. 20.2 - Prob. 3ST Ch. 20.2 - Prob. 4ST Ch. 20 - Prob. 1VQP Ch. 20 - Prob. 2VQP Ch. 20 - Prob. 3VQP

Identify the opportunity cost of production of each goods and comparative advantage of each country.

Concept explainers

Identify the opportunity cost of production of each goods and comparative advantage of each country.

Explanation of Solution

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Chapter 20 Solutions