Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 33, Problem 2SCQ
Brazil 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
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The figure below depicts the production possibilities
curve (PPC) of a country. It also depicts the
consumption possibilities curve (CPC) when the country
is engaged in trade with one other country. Point C is
this country's consumption when that trade occurs.
Quantity of 350
good y
300
250
200
150
100
50
0
0
20
40
19
C
60
80
100
120
Quantity of good x
Calculate how much this country trades with the other
country in good y when the two countries engage in
free trade. Enter a whole number only. Enter a positive
number if this country exports good y, and a negative
number if it imports it. Enter O if the answer cannot be
obtained with the information given. Since this is a
graphical question, approximate answers (within 20 of
the exact answer) are accepted. Hint: consider how
much the country produces and consumes this good.
Two countries produce two goods and they each have 3 million hours of labor. Consider the table that shows the quantity produced per labor hour:
Shirts
Corn (bushels)
Alpha
4
12
Beta
2
10
If each country specializes in the good for which it has a comparative advantage then in total the two countries can together produce million shirts and million bushels of corn. Enter whole numbers.
Suppose that France and Germany both produce wine and cheese. The table below shows combinations of the goods that each country can produce in a day.
Part 2
France
Germany
Wine (Bottles)
Cheese (Pounds)
Wine (Bottles)
Cheese (Pounds)
0
8
0
25
1
6
1
20
2
4
2
15
3
2
3
10
4
0
4
5
5
0
Part 3
Who has the comparative advantage in producing wine and who has the comparative advantage in producing cheese?
Part 4
A.
Neither has a comparative advantage producing wine or cheese.
B.
France has a comparative advantage producing wine and Germany has a comparative advantage producing cheese.
C.
France has a comparative advantage producing cheese and Germany has a comparative advantage producing wine.
D.
France has a comparative advantage producing wine and cheese.
E.
Germany has a comparative advantage producing wine and cheese.
Part 5
Suppose that France is…
Chapter 33 Solutions
Principles of Economics 2e
Ch. 33 - True or False: The source of comparative advantage...Ch. 33 - Brazil can produce 100 pounds of beef or 10 autos....Ch. 33 - In France it takes one worker to produce one...Ch. 33 - In Germany it takes three workers to make one...Ch. 33 - How can there be any economic gains for a country...Ch. 33 - Table 33.15 shows how the average costs of...Ch. 33 - If the removal of trade banters is so beneficial...Ch. 33 - What is absolute advantage? What is comparative...Ch. 33 - Under what conditions does comparative advantage...Ch. 33 - What factors does Paul Krugman identity that...
Ch. 33 - Is it possible to have a comparative advantage in...Ch. 33 - How does comparative advantage lead to gains from...Ch. 33 - What is intra-industry trade?Ch. 33 - What are the two main sources of economic gains...Ch. 33 - What is splitting up the value chain?Ch. 33 - Are the gains from international trade more likely...Ch. 33 - Are differences in geography behind the...Ch. 33 - Why does the United States not have an absolute...Ch. 33 - Look at Exercise 33.2. Compute the opportunity...Ch. 33 - You just overheard your friend say the following:...Ch. 33 - Look at Table 33.9. Is there a range of trades for...Ch. 33 - You just got a job in Washington, D.C. You move...Ch. 33 - Does intra-industry trade contradict the theory of...Ch. 33 - Do consumers benefit from intra-industry trade?Ch. 33 - Why might intra-industry trade seem surprising...Ch. 33 - In World Trade Organization meetings, what do you...Ch. 33 - Why might a low-income country put up barriers to...Ch. 33 - Can a nations comparative advantage change over...Ch. 33 - France and Tunisia both have Mediterranean...Ch. 33 - In Japan, one worker can make 5 tons of rubber or...Ch. 33 - Review the numbers for Canada and Venezuela from...Ch. 33 - In Exercise 33.31, is there an ask where...Ch. 33 - From earlier chapters you will recall that...Ch. 33 - Consider two countries: South Korea and Taiwan....Ch. 33 - If trade increases world GDP by 1 per year, what...
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- Two countries (Home and Foreign) use labor to produce two goods: Cloth and Wheat. The number of units of the good that can be produced by one unit of labor are given below. The number of units of labor in the Home And Foreign countries are 10 and 30, respectively. a) Calculate the opportunity costs of Cloth in the two countries, briefly describing your calculation. What are the goods in which the countries have comparative advantage? b) Use appropriate examples for world price and indifference curves to show that both Home and Foreign benefit from trade. Mention the world price, and the point where production and consumption occur in the two countries after trade. Wheat Cloth Home 12 3 Foreign 4 2arrow_forwardSuppose that an hour of work in Brazil can produce 1 pound of coffee or 4 pounds of sugar. In Colombia, an hour of work produces 2 pounds of coffee or 5 pounds of sugar. Which country has the absolute advantage in coffee? In sugar? Calculate the opportunity cost of each good in each country. Which country has the comparative advantage in each good? Why? What would be a mutually beneficial terms of trade?arrow_forwardCountry A can produce either 200 personal computers or 800 tons of potatoes with the same amount of resources. Country B can produce either 500 personal computers or 1,000 tons of potatoes with the same amount of resources. 1) which country has the absolute advantage in PC? which country has the absolute advantage in potato? 2) which country has the comparative advantage in PC? which country has the comparative advantage in potato? 3) Any trading ratio between which two ratios (of PC to potato) would benefit both countries? 4) Assuming the trading ratio is "PC: tons of potatoes = 1:3". If Country A only produces PC and Country B only produces potato, when they trade, I.) how many extra tons of potatoes can Country A obtain, comparing to the scenario in which Country A produces potato by itself? II.)how many extra PCs can Country B obtain, comparing to the scenario in which Country B produces PC by itself?arrow_forward
- Suppose that a tailor in Cottonland can sew either 40 cotton shirts or 10 silk shirts per week, and a tailor in Silkland can sew either 18 cotton shirts or 6 silk shirts per week. There are 20 tailors in Cottonland and 20 tailors is Silkland. Answer the following questions: 2.1. What country has the absolute advantage in sewing cotton shirts? What country has the absolute advantage in sewing silk shirts? 2.2. What country has the comparative advantage in sewing cotton shirts? What country has the comparative advantage in sewing silk shirts? Numerically 2.3. If the two countries specialize and produce according to the comparative advantage criterion, how much in terms of cotton and silk shirts each country will produce per week? Fill in the table below with your calculations. Cotton shirts/per week Silk shirts/per week Cottonland Silklandarrow_forwardThe United States and Canada have the production possibilities curves shown above. It is determined that the United States has the comparative advantage in peanuts. Will both nations gain from trade if the terms of trade that are offered are 1 Peanut= 2 Corn? Why or why not? Show your work.arrow_forwardSuppose there are two states that do not trade: Iowa and Nebraska. Each state produces the same two goods: corn and wheat. For Iowa the opportunity cost of producing 1 bushel of wheat is 3 bushels of corn. For Nebraska the opportunity cost of producing 1 bushel of corn is 3 bushels of wheat. At present, Iowa produces 20 million bushels of wheat and 120 million bushels of corn, while Nebraska produces 20 million bushels of corn and 120 million bushels of wheat. a. If each state specialized in their respective comparative advantage: Iowa would produce million bushels of corn and million bushels of wheat. Nebraska would produce million bushels of wheat and million bushels of corn. Now assume Nebraska trades 120 million bushels of wheat for 120 million bushels of corn. With specialization and this trade, Nebraska will end up with million bushels of corn and million bushels of wheat, while Iowa will end up with million bushels of corn and million bushels of wheat. b.…arrow_forward
- In the no specialization-no trade case, country X produces and consumes 60 units of good A and 10 units of good B. Country Y produces and consumes 20 units of good A and 20 units of good B. If the two countries specialize and trade, how many more units of good B will country X consume?arrow_forwardWhen can two countries gain from trading two goods? when the first country can only produce the first good and the second country can only produce the second good when the first country can produce both goods, but can only produce the second good at great cost, and the second country can produce both goods, but can only produce the first good at great cost when the first country is better at producing both goods and the second country is worse at producing both goods Two countries could gain from trading two goods under all of the above conditions.arrow_forwardIf Italy is said to have an absolute advantage over the United States in the production of wheat, this means that, given the same resources, the United States must have a comparative advantage over Italy in the production of wheat. Italy must have an absolute advantage over the United States in producing all goods. the United States must have an absolute advantage in producing some good other than wheat. Italy can produce more wheat than the United States. Italy has an absolute advantage in all goods that are complements to wheat.arrow_forward
- Suppose that an hour of work in Germany can produce 5 pastries or 4 sausages. In Denmark, an hour of work produces 4 pastries or 3 sausages. Which country has the absolute advantage in pastries? In sausages? Calculate the opportunity cost of each good in each country. Which country has the comparative advantage in each good? Why? What would be a mutually beneficial terms of trade?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_forwardThe figure shows the markets for shoes if there is no trade between the United States and Brazil. Which country has a comparative advantage in producing shoes? With international trade, explain which country would export shoes and how the price of shoes in the importing country and the quantity produced by the importing country would change. Explain which country gains from this trade.arrow_forward
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