Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 32.2, Problem 2QQ
To determine
The two different markets and two different prices determined by them.
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In your opinion which economy is better. A closed economy or an open economy. Explain?
How does an open economy versus a closed economy impact government policy decisions?
A country produces two goods: coconuts and umbrellas. Their production possibilities frontier (PPF) places coconuts on the x-axis and umbrellas on the y-axis.
How would a drought that makes it difficult to grow coconuts but does not affect the production of umbrellas change the PPF?
Neither the value of the x-intercept nor the y-intercept would change
The value of the y-intercept would increase but the value of the x-intercept would not change
The value of the x-intercept would increase but the value of the y-intercept would not change
Both the value of the x-intercept and the y-intercept would increase
The value of the y-intercept would decrease but the value of the x-intercept would not change
The value of the x-intercept would decrease but the value of the y-intercept would not change
Chapter 32 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
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- How can you say that a country participates in the global market?arrow_forwardWho are the winners and losers of the free trade between two countries? Can free trade between the two countries make consumers of both countries better off? In answering this question, consider discussing: How are you and your household connected to the global economy? Which imported goods and services do you buy? Are your consumption patterns based on comparative advantage? How do US trade patterns, based on comparative advantage, contribute to income inequality in the US, according to the Heckscher-Ohlin model? How has trade affected international income inequality? What were some recent tariffs? Who really pays the cost of tariffs?arrow_forward"Consider a small open economy that produces and consumes two goods: textiles and technology. The country has experienced a technological breakthrough in textile manufacturing, increasing its productivity. At the same time, the global demand for technology, the country's other export, has decreased. Analyze the following: a) How would the technological breakthrough in textile manufacturing affect the country's production possibility frontier? b) What could be the short-term and long-term effects on the country’s terms of trade? c) Discuss how the decrease in global demand for technology could influence the country's export revenues and economic growth. d) Propose one policy measure the government could take to mitigate any negative impacts on the economy due to these changes."arrow_forward
- What new opportunities are available in the goods markets and the financial markets in an open economy?arrow_forwardExplain how each of the following situations would affect a nations production possibility curve. A technological innovation allows the nation to more efficiently convert solar energy to electricity.arrow_forwardDerive the production possibilities frontier (PPF) for Home and Foreign and plot it in a graph with good x in the horizontal axis and good y in the vertical axis.arrow_forward
- In the Heckscher-Ohlin model, suppose the two factors of production are: high-skilled labor (H) and regular labor (L). The two sectors are manufacturing and business services. Manufacturing uses regular labor more intensively, and business services uses high-skilled labor more intensively. The two countries are the U.S. and China, and the U.S. has a comparative advantage in business services. a. Illustrate the effect of opening up to trade on the U.S. with the PPF and indifference curve diagram. Make sure you clearly label everything. What happens to the relative price of business services in the U.S.? Show clearly the gains from trade. b. What happens to the relative wage of high-skilled labor? Does inequality (the skill premium) increase? Show all work and explain. 2. Evidence for or against Heckscher-Ohlin model Leontieff Paradox i. Briefly describe the paradoxii.We discussed several explanations for the paradoxical result in class. Briefly describe two explanations. Inequality…arrow_forwardSuppose two countries produce the same twogoods and have identical production possibilitiesfrontiers. Do you expect these countries to trade?Explain why or why not.arrow_forwardwhat are the advantages and disadvantages of open economies and closed economies? How has covid and other recent events with the supply chain impacted these types of economies?arrow_forward
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