The likely source of the comparative advantage of each of the exporting countries: The United States exports software to Venezuela and Venezuela exports oil to the United States. The United States exports airplanes to China and China exports clothing to the United States. The United States exports sweat to Columbia and Columbia exports coffee to the United States. Concept Introduction: Comparative advantage is the ability to produce goods or services more efficiently i.e. at lower opportunity cost than any other activity. There are many sources of comparative advantage which are important in the production of a certain product in a nation. International differences in climate, factor endowments and technology are the sources of comparative advantage.

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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 8, Problem 2P

To determine

To Explain:

The likely source of the comparative advantage of each of the exporting countries:

The United States exports software to Venezuela and Venezuela exports oil to the United States.

The United States exports airplanes to China and China exports clothing to the United States.

The United States exports sweat to Columbia and Columbia exports coffee to the United States.

Concept Introduction:

Comparative advantage is the ability to produce goods or services more efficiently i.e. at lower opportunity cost than any other activity. There are many sources of comparative advantage which are important in the production of a certain product in a nation. International differences in climate, factor endowments and technology are the sources of comparative advantage.

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2. a) Consider a market where one firm (firm 1) currently produces, but a second firm (firm 2) is intending to enter and sell an identical product. The market has inverse demand given by p = 40 – Q, where Q is the total output sold in the market. Firm 1 has a marginal cost of 16 and firm 2 has a marginal cost of c < 16, with no fixed cost for either firm. Firm 2 has a choice of competing on price or quantity, with firms making their choices simultaneously (i.e. the market will be either a Bertrand or Cournot duopoly). If you were advising firm 2 on entering this market, how would you advise it to compete? To what extent would the size of firm 2’s cost advantage affect your advice? b) Now assume that firm 2 is aware that other firms are considering entering the market, so the market may over time change from a duopoly to an oligopoly with more than two firms. This would not change the nature of competition (i.e. any additional firms would set price or quantity in line with the first…

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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 8, Problem 2P

To determine

To Explain:

The likely source of the comparative advantage of each of the exporting countries:

The United States exports software to Venezuela and Venezuela exports oil to the United States.

The United States exports airplanes to China and China exports clothing to the United States.

The United States exports sweat to Columbia and Columbia exports coffee to the United States.

Concept Introduction:

Comparative advantage is the ability to produce goods or services more efficiently i.e. at lower opportunity cost than any other activity. There are many sources of comparative advantage which are important in the production of a certain product in a nation. International differences in climate, factor endowments and technology are the sources of comparative advantage.

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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 8, Problem 2P

To determine

To Explain:

The likely source of the comparative advantage of each of the exporting countries:

The United States exports software to Venezuela and Venezuela exports oil to the United States.

The United States exports airplanes to China and China exports clothing to the United States.

The United States exports sweat to Columbia and Columbia exports coffee to the United States.

Concept Introduction:

Comparative advantage is the ability to produce goods or services more efficiently i.e. at lower opportunity cost than any other activity. There are many sources of comparative advantage which are important in the production of a certain product in a nation. International differences in climate, factor endowments and technology are the sources of comparative advantage.

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Check out a sample textbook solution

See solution

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 8, Problem 2P

To determine