Essentials of Economics (MindTap Course List)
7th Edition
ISBN: 9781285165950
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 3, Problem 4QR
To determine
The
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Is absolute advantage or comparative advantage more important for trade? Give an Example
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"Everyone has a comparative advantage."
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Essentials of Economics (MindTap Course List)
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- Distinguish between absolute and comparative advantage. 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_forwardWhat are the impacts of comparative advantage and absolute advantage?arrow_forward
- Is absolute advantage or comparative advantagemore important for trade? Explain your reasoningusing the example in your answer to question 3.arrow_forwardThe 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_forwardExplain the difference between absolute advantage and comparative advantage. Which is more important in determining trade patterns, absolute advantage or comparative advantage? Why?arrow_forward
- How is the theory of absolute advantage similar to that of comparative advantage? How is it different?arrow_forwardEvaluate the following statement: "Trade is like football: one team wins and the other team loses." This topic is related to chapter 2. Use your knowledge of ‘absolute advantage’ and ‘comparative advantage’ in your response.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_forward
- What is the relationship between production costs and comparative advantage? Group of answer choices Comparative advantage considers, “How much am I giving up to produce this good in this country?” Comparative advantage identifies the good for which the producer’s absolute advantage is relatively smaller. Comparative advantage identifies where the producer’s absolute productivity disadvantage is relatively larger. Comparative advantage happens when the production costs for both trading partners are the same.arrow_forwardSuppose that France and Germany both produce wine and cheese. The table below shows combinations of the goods that each country can produce in a day. Part 2 France Germany Wine (Bottles) Cheese (Pounds) Wine (Bottles) Cheese (Pounds) 0 8 0 25 1 6 1 20 2 4 2 15 3 2 3 10 4 0 4 5 5 0 Part 3 Who has the comparative advantage in producing wine and who has the comparative advantage in producing cheese? Part 4 A. Neither has a comparative advantage producing wine or cheese. B. France has a comparative advantage producing wine and Germany has a comparative advantage producing cheese. C. France has a comparative advantage producing cheese and Germany has a comparative advantage producing wine. D. France has a comparative advantage producing wine and cheese. E. Germany has a comparative advantage producing wine and cheese. Part 5 Suppose that France is…arrow_forwardWhat is the difference between absolute advantage and comparative advantage and If two parties trade based on comparative advantage and both gain, in what range must the price implicit in the trade lie?arrow_forward
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