The effect of comparative advantage of a country in their trade.

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Answer 1

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 9, Problem 1QE

To determine

The effect of comparative advantage of a country in their trade.

Expert Solution & Answer

Explanation of Solution

If a country has no absolute advantage on trade, it can go with the comparatively advantaged goods. In this case, the trade is based on the law opportunity cost. If a country has low opportunity cost in the production of any good, it can export the product with a low opportunity cost and import the product with the high opportunity cost. Thus, it is better to export the good with high comparative advantage and import the good with low comparative advantage.

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1. Riaz has a limited income and consumes only Apple and Bread. His current consumption choice is 3 apples and 5 bread. The price of apple is $3 each, and the price of bread is $2.5 each. The last apple added 5 units to Sadid's utility, while the last bread added 7 units. Is Riaz making the utility-maximizing choice? Why or why not? Do you suggest any adjustment in Riaz's consumption bundle? Why or why not? Give reasons in support of your answer. State the condition for a consumer's utility maximizing choice and illustrate graphically. 2. Consider the following table of long-run total costs for three different firms: Quantity Total Cost ($) Firm A Firm B Firm C 1 60 11 21 2 70 24 34 3 80 39 49 4 90 56 66 5 100 75 85 6 110 96 106 7 120 119 129 Does each of these firms experience economies of scale or diseconomies of scale? Explain your answer with necessary calculations.

Riaz has a limited income and consumes only Apple and Bread. His current consumption choice is 3 apples and 5 bread. The price of apple is $3 each, and the price of bread is $2.5 each. The last apple added 5 units to Sadid's utility, while the last bread added 7 units. Is Riaz making the utility-maximizing choice? Why or why not? Do you suggest any adjustment in Riaz's consumption bundle? Why or why not? Give reasons in support of your answer.State the condition for a consumer's utility maximizing choice and illustrate graphically.

1. Riaz has a limited income and consumes only Apple and Bread. His current consumption choice is 3 apples and 5 bread. The price of apple is $3 each, and the price of bread is $2.5 each. The last apple added 5 units to Sadid's utility, while the last bread added 7 units. Is Riaz making the utility-maximizing choice? Why or why not? Do you suggest any adjustment in Riaz's consumption bundle? Why or why not? Give reasons in support of your answer. State the condition for a consumer's utility maximizing choice and illustrate graphically.

Answer 2

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 9, Problem 1QE

To determine

The effect of comparative advantage of a country in their trade.

Expert Solution & Answer

Explanation of Solution

If a country has no absolute advantage on trade, it can go with the comparatively advantaged goods. In this case, the trade is based on the law opportunity cost. If a country has low opportunity cost in the production of any good, it can export the product with a low opportunity cost and import the product with the high opportunity cost. Thus, it is better to export the good with high comparative advantage and import the good with low 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 9, Problem 1QE

To determine

The effect of comparative advantage of a country in their trade.

Expert Solution & Answer

Explanation of Solution

If a country has no absolute advantage on trade, it can go with the comparatively advantaged goods. In this case, the trade is based on the law opportunity cost. If a country has low opportunity cost in the production of any good, it can export the product with a low opportunity cost and import the product with the high opportunity cost. Thus, it is better to export the good with high comparative advantage and import the good with low comparative advantage.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

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 9, Problem 1QE

To determine

The effect of comparative advantage of a country in their trade.

Expert Solution & Answer

Explanation of Solution

If a country has no absolute advantage on trade, it can go with the comparatively advantaged goods. In this case, the trade is based on the law opportunity cost. If a country has low opportunity cost in the production of any good, it can export the product with a low opportunity cost and import the product with the high opportunity cost. Thus, it is better to export the good with high comparative advantage and import the good with low comparative advantage.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 9, Problem 1QE

To determine

The effect of comparative advantage of a country in their trade.

Expert Solution & Answer

Explanation of Solution

If a country has no absolute advantage on trade, it can go with the comparatively advantaged goods. In this case, the trade is based on the law opportunity cost. If a country has low opportunity cost in the production of any good, it can export the product with a low opportunity cost and import the product with the high opportunity cost. Thus, it is better to export the good with high comparative advantage and import the good with low comparative advantage.

Answer 6

Chapter 9, Problem 1QE

To determine

The effect of comparative advantage of a country in their trade.

Expert Solution & Answer

Explanation of Solution

If a country has no absolute advantage on trade, it can go with the comparatively advantaged goods. In this case, the trade is based on the law opportunity cost. If a country has low opportunity cost in the production of any good, it can export the product with a low opportunity cost and import the product with the high opportunity cost. Thus, it is better to export the good with high comparative advantage and import the good with low comparative advantage.

Answer 7

Chapter 9, Problem 1QE

To determine

The effect of comparative advantage of a country in their trade.

Answer 8

Expert Solution & Answer

Explanation of Solution

If a country has no absolute advantage on trade, it can go with the comparatively advantaged goods. In this case, the trade is based on the law opportunity cost. If a country has low opportunity cost in the production of any good, it can export the product with a low opportunity cost and import the product with the high opportunity cost. Thus, it is better to export the good with high comparative advantage and import the good with low comparative advantage.