Reasons behind gains from specialization in production and engagement in international trade. Concept Introduction : International Trade: Trade between two different countries is known as international trade. Opportunity Cost : It refers to the amount of next best alternative that is foregone in order to take up one course of action. For example, an entrepreneur leaving his job to start his/her own business foregoes a salary. That salary is the opportunity cost of the entrepreneur. Specialization in production: A country specializes in a production process due to absolute or comparative cost advantage. Absolute Advantage refers to the ability of a nation to produce a good or a service more efficiently than the other countries. Comparative Advantage refers to the ability of a nation to produce a good or a service at a lower opportunity cost in comparison with the other countries.

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Answer 1

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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 32, Problem 32.1LO

To determine

:

Reasons behind gains from specialization in production and engagement in international trade.

Concept Introduction:

International Trade: Trade between two different countries is known as international trade.

Opportunity Cost: It refers to the amount of next best alternative that is foregone in order to take up one course of action. For example, an entrepreneur leaving his job to start his/her own business foregoes a salary. That salary is the opportunity cost of the entrepreneur.

Specialization in production: A country specializes in a production process due to absolute or comparative cost advantage.

Absolute Advantage refers to the ability of a nation to produce a good or a service more efficiently than the other countries.

Comparative Advantage refers to the ability of a nation to produce a good or a service at a lower opportunity cost in comparison with the other countries.

Expert Solution & Answer

Explanation of Solution

Answer:

Gains from specialization: Economies of scale is an advantage that the country receives from specialization. The average cost of production decreases and total output increases with higher output.
Gains from trade: Two countries trade with each other only when they find it to be mutually beneficial. The benefits the country receives through more production and consumption of goods because of specialization of production and international trade is known as gains from trade.

A country may have absolute cost advantage but international trade should depend on comparative cost advantage. The country/economy producing a commodity at a lower opportunity cost can produce it more efficiently.

An example will make it clear. Suppose there are two countries producing two goods: cars and trucks.

The below table shows the total output of both countries:

Labor Hours	Cars	Trucks
Country A	10	5
Country B	8	2

As country B produces both cars and trucks with less number of labor hours than country A (10 hours> 8 hours for cars and 5 hours > 2 hours for trucks), country B has an absolute advantage in the production of both cars and trucks.

Opportunity cost of producing a car in both countries are as follows:

Opportunity Cost	Cars	Trucks
Country A	10/5 = 2 trucks	5/10 = 0.5 cars
Country B	8/2 = 4 trucks	2/8 = 0.25 cars

If every country produces the good in which they have specialization, then the trade could take place.

If Country A produces a car, it has to spend 10 hours. It could have assembled 2 trucks in that time. Alternatively, the time spent to build a truck could have been used to make half a car.

Same explanation goes for country B as well. The time spent to finish a truck could have been used to finish 0.25 cars and time spent to build a car could have been used to finish 4 trucks.

Thus, the country A has a comparative advantage in the production of cars as it has to forego only 2 trucks to build a car instead of 4 trucks by country B.

Country B has a comparative advantage in the production of trucks as it has to forego only 0.25 cars to build a truck instead of 0.5 trucks by country A.

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Assume the United States is a large consumer of steel, able to influence the world price. DUS and SUS denote its demand and supply schedules in Figure 1. The overall (United States plus world) supply schedule of steel is denoted by SUS.+W. Figure 1 Import Tariff Levied by a Large Country Answer all questions (a-f) by referring to Figure 1 above. a) Calculate the free trade market equilibrium price, domestic consumption, and volumE Answer all questions (a-f) by referring to Figure 1 above. a) Calculate the free trade market equilibrium price, domestic consumption, and volume of steel imports by the US. [5 marks] b) Suppose the United States imposes a tariff (t) of $100 on each ton of steel imported. With the tariff, calculate the price of steel and the volume of steel imports by the US. [5 marks] c) Of the $100 tariff, how much is passed on to the US consumer via a higher price, and how much is borne by the foreign exporter? [5 marks] d) Calculate the tariff's deadweight welfare loss to…

1. A doctor quits his job, which pays $77,000 per annum, to open a non-governmental organization (NGO) to serve the needs of orphans. His annual expenses for the NGO amounts to $62,700 for food and daily supplies, $9,400 for maintenance, and $1,800 for books. What is his opportunity cost of opening the NGO? (Show working) 2. During the COVID-19 pandemic, hospitals worldwide faced severe resource constraints, including: a. Limited ICU beds b. Shortage of ventilators c. Insufficient doctors and nurses d. Lack of vaccines in early 2021 Governments and hospitals had to make critical decisions about who receives treatment first and how to allocate limited resources efficiently. In no more than 150 words and using core economic concepts of scarcity, choice and opportunity cost, how would you help your government make these critical decisions?

What is the argument about necessary evil?

Answer 2

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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 32, Problem 32.1LO

To determine

:

Reasons behind gains from specialization in production and engagement in international trade.

Concept Introduction:

International Trade: Trade between two different countries is known as international trade.

Opportunity Cost: It refers to the amount of next best alternative that is foregone in order to take up one course of action. For example, an entrepreneur leaving his job to start his/her own business foregoes a salary. That salary is the opportunity cost of the entrepreneur.

Specialization in production: A country specializes in a production process due to absolute or comparative cost advantage.

Absolute Advantage refers to the ability of a nation to produce a good or a service more efficiently than the other countries.

Comparative Advantage refers to the ability of a nation to produce a good or a service at a lower opportunity cost in comparison with the other countries.

Expert Solution & Answer

Explanation of Solution

Answer:

Gains from specialization: Economies of scale is an advantage that the country receives from specialization. The average cost of production decreases and total output increases with higher output.
Gains from trade: Two countries trade with each other only when they find it to be mutually beneficial. The benefits the country receives through more production and consumption of goods because of specialization of production and international trade is known as gains from trade.

A country may have absolute cost advantage but international trade should depend on comparative cost advantage. The country/economy producing a commodity at a lower opportunity cost can produce it more efficiently.

An example will make it clear. Suppose there are two countries producing two goods: cars and trucks.

The below table shows the total output of both countries:

Labor Hours	Cars	Trucks
Country A	10	5
Country B	8	2

As country B produces both cars and trucks with less number of labor hours than country A (10 hours> 8 hours for cars and 5 hours > 2 hours for trucks), country B has an absolute advantage in the production of both cars and trucks.

Opportunity cost of producing a car in both countries are as follows:

Opportunity Cost	Cars	Trucks
Country A	10/5 = 2 trucks	5/10 = 0.5 cars
Country B	8/2 = 4 trucks	2/8 = 0.25 cars

If every country produces the good in which they have specialization, then the trade could take place.

If Country A produces a car, it has to spend 10 hours. It could have assembled 2 trucks in that time. Alternatively, the time spent to build a truck could have been used to make half a car.

Same explanation goes for country B as well. The time spent to finish a truck could have been used to finish 0.25 cars and time spent to build a car could have been used to finish 4 trucks.

Thus, the country A has a comparative advantage in the production of cars as it has to forego only 2 trucks to build a car instead of 4 trucks by country B.

Country B has a comparative advantage in the production of trucks as it has to forego only 0.25 cars to build a truck instead of 0.5 trucks by country A.

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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 32, Problem 32.1LO

To determine

:

Reasons behind gains from specialization in production and engagement in international trade.

Concept Introduction:

International Trade: Trade between two different countries is known as international trade.

Opportunity Cost: It refers to the amount of next best alternative that is foregone in order to take up one course of action. For example, an entrepreneur leaving his job to start his/her own business foregoes a salary. That salary is the opportunity cost of the entrepreneur.

Specialization in production: A country specializes in a production process due to absolute or comparative cost advantage.

Absolute Advantage refers to the ability of a nation to produce a good or a service more efficiently than the other countries.

Comparative Advantage refers to the ability of a nation to produce a good or a service at a lower opportunity cost in comparison with the other countries.

Expert Solution & Answer

Explanation of Solution

Answer:

Gains from specialization: Economies of scale is an advantage that the country receives from specialization. The average cost of production decreases and total output increases with higher output.
Gains from trade: Two countries trade with each other only when they find it to be mutually beneficial. The benefits the country receives through more production and consumption of goods because of specialization of production and international trade is known as gains from trade.

A country may have absolute cost advantage but international trade should depend on comparative cost advantage. The country/economy producing a commodity at a lower opportunity cost can produce it more efficiently.

An example will make it clear. Suppose there are two countries producing two goods: cars and trucks.

The below table shows the total output of both countries:

Labor Hours	Cars	Trucks
Country A	10	5
Country B	8	2

As country B produces both cars and trucks with less number of labor hours than country A (10 hours> 8 hours for cars and 5 hours > 2 hours for trucks), country B has an absolute advantage in the production of both cars and trucks.

Opportunity cost of producing a car in both countries are as follows:

Opportunity Cost	Cars	Trucks
Country A	10/5 = 2 trucks	5/10 = 0.5 cars
Country B	8/2 = 4 trucks	2/8 = 0.25 cars

If every country produces the good in which they have specialization, then the trade could take place.

If Country A produces a car, it has to spend 10 hours. It could have assembled 2 trucks in that time. Alternatively, the time spent to build a truck could have been used to make half a car.

Same explanation goes for country B as well. The time spent to finish a truck could have been used to finish 0.25 cars and time spent to build a car could have been used to finish 4 trucks.

Thus, the country A has a comparative advantage in the production of cars as it has to forego only 2 trucks to build a car instead of 4 trucks by country B.

Country B has a comparative advantage in the production of trucks as it has to forego only 0.25 cars to build a truck instead of 0.5 trucks by country A.

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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 32, Problem 32.1LO

To determine

:

Reasons behind gains from specialization in production and engagement in international trade.

Concept Introduction:

International Trade: Trade between two different countries is known as international trade.

Opportunity Cost: It refers to the amount of next best alternative that is foregone in order to take up one course of action. For example, an entrepreneur leaving his job to start his/her own business foregoes a salary. That salary is the opportunity cost of the entrepreneur.

Specialization in production: A country specializes in a production process due to absolute or comparative cost advantage.

Absolute Advantage refers to the ability of a nation to produce a good or a service more efficiently than the other countries.

Comparative Advantage refers to the ability of a nation to produce a good or a service at a lower opportunity cost in comparison with the other countries.

Expert Solution & Answer

Explanation of Solution

Answer:

Gains from specialization: Economies of scale is an advantage that the country receives from specialization. The average cost of production decreases and total output increases with higher output.
Gains from trade: Two countries trade with each other only when they find it to be mutually beneficial. The benefits the country receives through more production and consumption of goods because of specialization of production and international trade is known as gains from trade.

A country may have absolute cost advantage but international trade should depend on comparative cost advantage. The country/economy producing a commodity at a lower opportunity cost can produce it more efficiently.

An example will make it clear. Suppose there are two countries producing two goods: cars and trucks.

The below table shows the total output of both countries:

Labor Hours	Cars	Trucks
Country A	10	5
Country B	8	2

As country B produces both cars and trucks with less number of labor hours than country A (10 hours> 8 hours for cars and 5 hours > 2 hours for trucks), country B has an absolute advantage in the production of both cars and trucks.

Opportunity cost of producing a car in both countries are as follows:

Opportunity Cost	Cars	Trucks
Country A	10/5 = 2 trucks	5/10 = 0.5 cars
Country B	8/2 = 4 trucks	2/8 = 0.25 cars

If every country produces the good in which they have specialization, then the trade could take place.

If Country A produces a car, it has to spend 10 hours. It could have assembled 2 trucks in that time. Alternatively, the time spent to build a truck could have been used to make half a car.

Same explanation goes for country B as well. The time spent to finish a truck could have been used to finish 0.25 cars and time spent to build a car could have been used to finish 4 trucks.

Thus, the country A has a comparative advantage in the production of cars as it has to forego only 2 trucks to build a car instead of 4 trucks by country B.

Country B has a comparative advantage in the production of trucks as it has to forego only 0.25 cars to build a truck instead of 0.5 trucks by country A.

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Answer 5

Chapter 32, Problem 32.1LO

To determine

:

Reasons behind gains from specialization in production and engagement in international trade.

Concept Introduction:

International Trade: Trade between two different countries is known as international trade.

Opportunity Cost: It refers to the amount of next best alternative that is foregone in order to take up one course of action. For example, an entrepreneur leaving his job to start his/her own business foregoes a salary. That salary is the opportunity cost of the entrepreneur.

Specialization in production: A country specializes in a production process due to absolute or comparative cost advantage.

Absolute Advantage refers to the ability of a nation to produce a good or a service more efficiently than the other countries.

Comparative Advantage refers to the ability of a nation to produce a good or a service at a lower opportunity cost in comparison with the other countries.

Expert Solution & Answer

Explanation of Solution

Answer:

Gains from specialization: Economies of scale is an advantage that the country receives from specialization. The average cost of production decreases and total output increases with higher output.
Gains from trade: Two countries trade with each other only when they find it to be mutually beneficial. The benefits the country receives through more production and consumption of goods because of specialization of production and international trade is known as gains from trade.

A country may have absolute cost advantage but international trade should depend on comparative cost advantage. The country/economy producing a commodity at a lower opportunity cost can produce it more efficiently.

An example will make it clear. Suppose there are two countries producing two goods: cars and trucks.

The below table shows the total output of both countries:

Labor Hours	Cars	Trucks
Country A	10	5
Country B	8	2

As country B produces both cars and trucks with less number of labor hours than country A (10 hours> 8 hours for cars and 5 hours > 2 hours for trucks), country B has an absolute advantage in the production of both cars and trucks.

Opportunity cost of producing a car in both countries are as follows:

Opportunity Cost	Cars	Trucks
Country A	10/5 = 2 trucks	5/10 = 0.5 cars
Country B	8/2 = 4 trucks	2/8 = 0.25 cars

If every country produces the good in which they have specialization, then the trade could take place.

If Country A produces a car, it has to spend 10 hours. It could have assembled 2 trucks in that time. Alternatively, the time spent to build a truck could have been used to make half a car.

Same explanation goes for country B as well. The time spent to finish a truck could have been used to finish 0.25 cars and time spent to build a car could have been used to finish 4 trucks.

Thus, the country A has a comparative advantage in the production of cars as it has to forego only 2 trucks to build a car instead of 4 trucks by country B.

Country B has a comparative advantage in the production of trucks as it has to forego only 0.25 cars to build a truck instead of 0.5 trucks by country A.

Answer 6

Chapter 32, Problem 32.1LO

To determine

:

Reasons behind gains from specialization in production and engagement in international trade.

Concept Introduction:

International Trade: Trade between two different countries is known as international trade.

Opportunity Cost: It refers to the amount of next best alternative that is foregone in order to take up one course of action. For example, an entrepreneur leaving his job to start his/her own business foregoes a salary. That salary is the opportunity cost of the entrepreneur.

Specialization in production: A country specializes in a production process due to absolute or comparative cost advantage.

Absolute Advantage refers to the ability of a nation to produce a good or a service more efficiently than the other countries.

Comparative Advantage refers to the ability of a nation to produce a good or a service at a lower opportunity cost in comparison with the other countries.

Expert Solution & Answer

Explanation of Solution

Answer:

Gains from specialization: Economies of scale is an advantage that the country receives from specialization. The average cost of production decreases and total output increases with higher output.
Gains from trade: Two countries trade with each other only when they find it to be mutually beneficial. The benefits the country receives through more production and consumption of goods because of specialization of production and international trade is known as gains from trade.

A country may have absolute cost advantage but international trade should depend on comparative cost advantage. The country/economy producing a commodity at a lower opportunity cost can produce it more efficiently.

An example will make it clear. Suppose there are two countries producing two goods: cars and trucks.

The below table shows the total output of both countries:

Labor Hours	Cars	Trucks
Country A	10	5
Country B	8	2

As country B produces both cars and trucks with less number of labor hours than country A (10 hours> 8 hours for cars and 5 hours > 2 hours for trucks), country B has an absolute advantage in the production of both cars and trucks.

Opportunity cost of producing a car in both countries are as follows:

Opportunity Cost	Cars	Trucks
Country A	10/5 = 2 trucks	5/10 = 0.5 cars
Country B	8/2 = 4 trucks	2/8 = 0.25 cars

If every country produces the good in which they have specialization, then the trade could take place.

If Country A produces a car, it has to spend 10 hours. It could have assembled 2 trucks in that time. Alternatively, the time spent to build a truck could have been used to make half a car.

Same explanation goes for country B as well. The time spent to finish a truck could have been used to finish 0.25 cars and time spent to build a car could have been used to finish 4 trucks.

Thus, the country A has a comparative advantage in the production of cars as it has to forego only 2 trucks to build a car instead of 4 trucks by country B.

Country B has a comparative advantage in the production of trucks as it has to forego only 0.25 cars to build a truck instead of 0.5 trucks by country A.

Answer 7

Chapter 32, Problem 32.1LO

To determine

:

Reasons behind gains from specialization in production and engagement in international trade.

Concept Introduction:

International Trade: Trade between two different countries is known as international trade.

Opportunity Cost: It refers to the amount of next best alternative that is foregone in order to take up one course of action. For example, an entrepreneur leaving his job to start his/her own business foregoes a salary. That salary is the opportunity cost of the entrepreneur.

Specialization in production: A country specializes in a production process due to absolute or comparative cost advantage.

Absolute Advantage refers to the ability of a nation to produce a good or a service more efficiently than the other countries.

Comparative Advantage refers to the ability of a nation to produce a good or a service at a lower opportunity cost in comparison with the other countries.

Answer 8

Expert Solution & Answer

Explanation of Solution

Answer:

Gains from specialization: Economies of scale is an advantage that the country receives from specialization. The average cost of production decreases and total output increases with higher output.
Gains from trade: Two countries trade with each other only when they find it to be mutually beneficial. The benefits the country receives through more production and consumption of goods because of specialization of production and international trade is known as gains from trade.

A country may have absolute cost advantage but international trade should depend on comparative cost advantage. The country/economy producing a commodity at a lower opportunity cost can produce it more efficiently.

An example will make it clear. Suppose there are two countries producing two goods: cars and trucks.

The below table shows the total output of both countries:

Labor Hours	Cars	Trucks
Country A	10	5
Country B	8	2

As country B produces both cars and trucks with less number of labor hours than country A (10 hours> 8 hours for cars and 5 hours > 2 hours for trucks), country B has an absolute advantage in the production of both cars and trucks.

Opportunity cost of producing a car in both countries are as follows:

Opportunity Cost	Cars	Trucks
Country A	10/5 = 2 trucks	5/10 = 0.5 cars
Country B	8/2 = 4 trucks	2/8 = 0.25 cars

If every country produces the good in which they have specialization, then the trade could take place.

If Country A produces a car, it has to spend 10 hours. It could have assembled 2 trucks in that time. Alternatively, the time spent to build a truck could have been used to make half a car.

Same explanation goes for country B as well. The time spent to finish a truck could have been used to finish 0.25 cars and time spent to build a car could have been used to finish 4 trucks.

Thus, the country A has a comparative advantage in the production of cars as it has to forego only 2 trucks to build a car instead of 4 trucks by country B.

Country B has a comparative advantage in the production of trucks as it has to forego only 0.25 cars to build a truck instead of 0.5 trucks by country A.

Answer 9

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Answer 10

Expert Solution & Answer

Answer 11

Ch. 32 - Prob. 32.1LO Ch. 32 - Prob. 32.2LO Ch. 32 - Prob. 32.3LO Ch. 32 - Prob. 32.4LO Ch. 32 - Prob. 32.1SC Ch. 32 - Prob. 32.2SC Ch. 32 - Prob. 32.3SC Ch. 32 - Prob. 32.4SC Ch. 32 - Prob. 1CTQ Ch. 32 - Prob. 2CTQ

Explanation of Solution

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Chapter 32 Solutions