Opportunity Cost : It is the next best option available to a person. Opportunity cost refers to the benefits which are given up in the process of obtaining some other benefits. Comparative Advantage: In a trade, a country has comparative advantages in producing goods when the opportunity cost of producing that good is less in comparative to the nation with which it is trading. Heckscher-Ohlin model: It is the model of international trade based on comparative advantage principle. It is also called H-O model. According to H.O model the country has a comparative advantage in the production of those goods whose factors of productions are abundantly available. It means that the abundant factor has large use in the production of goods. It specifies that international trade increase the wage of labors which are intensively used in the production. Take an example America is capital-intensive nation, export of capital increases the wages of skilled labor.

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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 5, Problem 4P

To determine

Concept Introduction:

Opportunity Cost: It is the next best option available to a person. Opportunity cost refers to the benefits which are given up in the process of obtaining some other benefits.

Comparative Advantage: In a trade, a country has comparative advantages in producing goods when the opportunity cost of producing that good is less in comparative to the nation with which it is trading.

Heckscher-Ohlin model:

It is the model of international trade based on comparative advantage principle. It is also called H-O model. According to H.O model the country has a comparative advantage in the production of those goods whose factors of productions are abundantly available. It means that the abundant factor has large use in the production of goods.

It specifies that international trade increase the wage of labors which are intensively used in the production. Take an example America is capital-intensive nation, export of capital increases the wages of skilled labor.

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5. Download the Excel sheet from Brightspace. The data contains the GDP per capita and GNI per capita of OECD member countries in 2014 (both figures are reported in US dollars). The countries are ranked by GDP per capita. a. Compute the ratio of GNI to GDP for each country (GNI per capita/GDP per capita). What does this imply about net factor income from abroad for each country? b. Rank the countries based on the GNI/GDP ratio, starting with the country with the highest ratio and ending with the country with the lowest ratio. Which country has the highest ratio, and which has the lowest? c. Comment on why the countries you identified in the previous question have a large difference between GDP and GNI? What does the difference imply?

3. Answer the following questions about external wealth. a. Home has external wealth of $100 million in period t. In t+1, Home purchases $160 million foreign assets, and Foreign purchases $120 million in Home assets. Assume a world interest rate of 10% per annum. Compute the "change" in external wealth at t+1 for Home. b. A country's external wealth was -$1.5 billion at the end of 2015, and its trade balance was $750 million in 2016. Assume the world interest rate is 5% per annum. What is the "value" of a country's external wealth at the end of 2016?

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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 5, Problem 4P

To determine

Concept Introduction:

Opportunity Cost: It is the next best option available to a person. Opportunity cost refers to the benefits which are given up in the process of obtaining some other benefits.

Comparative Advantage: In a trade, a country has comparative advantages in producing goods when the opportunity cost of producing that good is less in comparative to the nation with which it is trading.

Heckscher-Ohlin model:

It is the model of international trade based on comparative advantage principle. It is also called H-O model. According to H.O model the country has a comparative advantage in the production of those goods whose factors of productions are abundantly available. It means that the abundant factor has large use in the production of goods.

It specifies that international trade increase the wage of labors which are intensively used in the production. Take an example America is capital-intensive nation, export of capital increases the wages of skilled labor.

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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 5, Problem 4P

To determine

Concept Introduction:

Opportunity Cost: It is the next best option available to a person. Opportunity cost refers to the benefits which are given up in the process of obtaining some other benefits.

Comparative Advantage: In a trade, a country has comparative advantages in producing goods when the opportunity cost of producing that good is less in comparative to the nation with which it is trading.

Heckscher-Ohlin model:

It is the model of international trade based on comparative advantage principle. It is also called H-O model. According to H.O model the country has a comparative advantage in the production of those goods whose factors of productions are abundantly available. It means that the abundant factor has large use in the production of goods.

It specifies that international trade increase the wage of labors which are intensively used in the production. Take an example America is capital-intensive nation, export of capital increases the wages of skilled labor.

Expert Solution & Answer

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Check out a sample textbook solution

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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 5, Problem 4P

To determine