Principles of Microeconomics
7th Edition
ISBN: 9781305156050
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 3, Problem 5PA
Subpart (a):
To determine
Calculate opportunity cost .
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.
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Principles of Microeconomics
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- In Japan, one worker can make 5 tons of rubber or 80 radios. In Malaysia, one worker can make 10 tons of rubber or 40 radios. Who has the absolute advantage in the production of rubber or radios? How can you tell? Calculate the opportunity cost of producing 80 additional radios in Japan and in Malaysia. (Your calculation may involve fractions, which is fine,) Which country has a comparative advantage in the production of radios? Calculate the opportunity cost of producing 10 additional tons of rubber in Japan and in Malaysia. Which country has a comparative advantage in producing rubber? In this example, does each country have an absolute advantage and a comparative advantage in the same good? In what product should Japan specialize? In what product should Malaysia specialize?arrow_forwardBrazil can produce 100 pounds of beef or 10 autos. In contrast the United States can produce 40 pounds of beef or 30 autos. Which country has the absolute advantage in beef? Which country has the absolute advantage in producing autos? What is the opportunity cost of producing one pound of beef In Brazil? What is the opportunity cost of producing one pound of beef in the United States?arrow_forwardAn average worker in Brazil can produce an ounce of soybeans in 20 minutes and an ounce of coffee in 60 minutes, while an average worker in Peru can produce an ounce of soybeans in 50 minutes and an ounce of coffee in 75 minutes.a. Who has the absolute advantage in coffee? Explain.b. Who has the comparative advantage in cof-fee? Explain.c. If the two countries specialize and trade with each other, who will import coffee? Explain.d. Assume that the two countries trade and that the country importing coffee trades 2 ounces of soybeans for 1 ounce of coffee. Explain why both countries will benefit from this trade.arrow_forward
- 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
- Suppose that in an hour an American worker can produce 200 clothes or 20 cars, while a Brazillian worker can produce 150 clothes or 10 cars. Each country has 8 hours available. Who has a comparative advantage in the production of clothes? Who has a comparative advantage in the production of cars? What is the opportunity cost for cars?arrow_forwardWhen a country changes from agricultural to industrial, how can it affect the comparative advantage of that country? How will it change the comparative advantage of the country?arrow_forwardIf each country specializes in the good in which it has a comparative advantage,....will gain from that trade becausearrow_forward
- Which of the following statements is TRUE? Output per Day of Work Food Clothing Country A 6. 3 Country B 1 Country A has an absolute advantage in making clothing. Country B has an absolute advantage in making food. Country B has a comparative advantage in making food. Country A has a comparative advantage in making clothing. O Country A will import the item in which it has a comparative advantage.arrow_forwardCountry X can produce 1,000 units of food and 2,000 units of clothes. Country Y can produce 1,000 units of food and 1,000 units of clothes. In order to maximize trade according to the principles of comparative advantage, country X should produce food and import clothes from country Y. country Y should produce food and import clothes from country X. country X and Y should produce both food and clothes to meet their own needs. country Y should produce both food and clothes, and import additional clothes from country X.arrow_forwardSuppose Mexico can produce either 2 million tomato plants or 2 million cannabis plants while the United States can produce 4 million tomato plants or 4 million cannabis plants during the same time period. Which country has the absolute advantage in tomatoes? A. Neither B. Mexico C. United States Who has the absolute advantage in cannabis? A. United States B. Mexico C. Neither Which country has the comparative advantage in tomatoes? A. United States B. Mexico C. Neither Which country has the comparative advantage in cannabis? A. Neither B. United States C. Mexicoarrow_forward
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