Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + LMS Integrated Aplia, 1 term Printed Access Card
7th Edition
ISBN: 9781305242500
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 3, Problem 5QR
To determine
The comparative advantage and benefit from trade.
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When countries specialize based on their comparative advantage and trade with each other, how does it lead to gains from trade for both countries (even if one country has an absolute advantage in both goods)?
If two parties trade based on comparative advantage and both gain, in what range must the price of the trade lie? Give an example
Will a country import or export products for which it has a comparative advantage? Explain.
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Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + LMS Integrated Aplia, 1 term Printed Access Card
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- If each country specializes in the good in which it has a comparative advantage,....will gain from that trade becausearrow_forwardIn the past, comparative advantages have sometimes shifted from one nation to another. What factors do you think caused these shifts? Why? Was there anything a nation could have done to prevent an advantage from shifting to another nation?arrow_forwardWhat is the difference between absolute advantage and comparative advantage in decisions to trade with another country?arrow_forward
- What is the doctrine of comparative advantage? Provide an example of a particular country’s comparative advantage.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_forwardThe table below shows the maximum quantities of two goods that each country can produce. If the countries follow the principle of comparative advantage, which of the following is a potential benefit of trade? Vibranium (tons) Gold (tons) Wakanda 8 tons 2 tons Zamunda 2 tons 1 ton Group of answer choices Trade can allow each country to increase consumption beyond its production possibilities frontier. Trade can allow each country to shift its production possibilities frontier outward to higher levels of production. Trade can allow each country to become less vulnerable to the actions of the other country. All of these answers are correct.arrow_forward
- Between two, the producer that requires a smaller quantity of inputs to produce a good Has an absolute advantage in the production of that good Must produce and not trade at all Has a comparative advantage in the production of that good Should not produce that good Should import that goodarrow_forwardIf a country produces only two goods, then it is not possible to have a comparative advantage in the production of both those goods. True Falsearrow_forwardIf a country produces more food and electronics than another country does it have a comparative advantage?arrow_forward
- American worker takes 20 hours to produce one computer and 300 hours to produce an RV. A Japanese worker takes 30 hours to produce one computer and 450 Hours to produce an RV. Which country has a comparative advantage in what product? Why?arrow_forwardWhich of the following BEST describes comparative advantage? Country A can produce a product at a lower opportunity cost than Country B Country A can produce more of a product than Country B Country A has a currency worth more than the currency of country B Country A uses a smaller amount of a resource to produce than Country Barrow_forwardDifferentiate between the following terms. Absolute advantage and comparative advantage.arrow_forward
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