Brief Principles of Macroeconomics (MindTap Course List)
7th Edition
ISBN: 9781285165929
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 3, Problem 5PA
Subpart (a):
To determine
Calculate
Subpart (b):
To determine
Comparative advantage.
Subpart (c):
To determine
Gains from the trade.
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England and Scotland both produce scones and sweaters. Suppose that an English works can produce 50 scones per hour or 1 sweater per hour. Suppose that a Scottish worker can produce 40 scones per hour or 2 sweaters per hour.
a. Which country has the absolute advantage in the production of each good? Which country has the comparative advantage?
b. If England and Scotland decide to trade, which commodity will Scotland trade to England? Explain.
c. If a Scottish worker could produce only 1 sweater per hour, would Scotland still gain from trade? Would England still gain from trade? Explain.
Home has a comparative advantage in wheat, and Foreign has a comparative advantage in cloth. Once trade occurs, Home produces 1,500 bushels of wheat, and Foreign produces 1,000 yards of cloth. The following table shows the amount of wheat that Home is willing to trade to acquire more cloth.
the international price of cloth is 1.5 bushels of wheat per yard, how many bushels of wheat will Home export to Foreign?
Select one:
a. 550 bushels
b. 800 bushels
c. 1,050 bushels
d. 700 bushels
Will a country import or export products for which it has a comparative advantage? Explain.
Chapter 3 Solutions
Brief Principles of Macroeconomics (MindTap Course List)
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- Country A can produce 20 units of wheat or 10 units of corn, while Country B can produce 15 units of wheat or 5 units of corn. Which country has the comparative advantage in producing wheat?arrow_forwardC O O O Suppose that Canada can make 45 kilograms of cheese or 60 bottles of wine with one year's worth of labour. France can make 30 kilograms of cheese or 54 bottles of wine with one year's worth of labour. What can we conclude from these numbers? a. Canada has a comparative advantage in the production of wine. b. Canada has an absolute advantage in the production of cheese. c. France has an absolute advantage in the production of wine. d. France has a comparative advantage in the production of cheese.arrow_forwardSuppose that each country completely specializes in the production of the good in which it has a comparative advantage, producing only that good. In this case, the country that produces pistachios will produce. million pounds per day and the country that produces chinos will produce million pairs per day.arrow_forward
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