MICROECONOMICS
11th Edition
ISBN: 9781266686764
Author: Colander
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 9, Problem 2QE
To determine
Trade opportunities in widget land and wadget land.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Country X can produce 1,000 units of food and 2,000 units of clothes. Country Y can produce 1,000 units of food and 1,000 units of clothes. In order to maximize trade according to the principles of comparative advantage,
country X should produce food and import clothes from country Y.
country Y should produce food and import clothes from country X.
country X and Y should produce both food and clothes to meet their own needs.
country Y should produce both food and clothes, and import additional clothes from country X.
Which of the following BEST describes comparative advantage?
Country A can produce a product at a lower opportunity cost than Country B
Country A can produce more of a product than Country B
Country A has a currency worth more than the currency of country B
Country A uses a smaller amount of a resource to produce than Country B
Suppose 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.…
Chapter 9 Solutions
MICROECONOMICS
Ch. 9.1 - Prob. 1QCh. 9.1 - Prob. 2QCh. 9.1 - Prob. 3QCh. 9.1 - Prob. 4QCh. 9.1 - Prob. 5QCh. 9.1 - Prob. 6QCh. 9.1 - Prob. 7QCh. 9.1 - Prob. 8QCh. 9.1 - Prob. 9QCh. 9.1 - Prob. 10Q
Ch. 9 - Prob. 1QECh. 9 - Prob. 2QECh. 9 - Prob. 3QECh. 9 - Prob. 4QECh. 9 - Prob. 5QECh. 9 - Prob. 6QECh. 9 - Prob. 7QECh. 9 - Prob. 8QECh. 9 - Prob. 9QECh. 9 - Prob. 10QECh. 9 - Prob. 11QECh. 9 - Prob. 12QECh. 9 - Prob. 13QECh. 9 - Prob. 14QECh. 9 - Prob. 15QECh. 9 - Prob. 16QECh. 9 - Prob. 17QECh. 9 - Prob. 18QECh. 9 - Prob. 19QECh. 9 - Prob. 1QAPCh. 9 - Prob. 2QAPCh. 9 - Prob. 3QAPCh. 9 - Prob. 4QAPCh. 9 - Prob. 5QAPCh. 9 - Prob. 1IPCh. 9 - Prob. 2IPCh. 9 - Prob. 3IPCh. 9 - Prob. 4IPCh. 9 - Prob. 5IP
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- Suppose that Country A can produce 6060 bags of sugar or 3030 bags of flour per worker hour. Country B can produce 4040 bags of sugar or 1010 bags of flour per worker hour. Assume that there is 100%100% specialization, and each country has 55 worker hours.If each country specializes in its comparative advantage, calculate the quantity of the good that Country B should produce.arrow_forwardSuppose that a worker in Freedonia can produce either 6 units of corn or 4 units of wheat per year, and a worker in Sylvania can produce either 4 units of corn or 6 units of wheat per year. Each nation has 10 workers. For many years the two countries traded, each completely specializing in producing the grain for which it has a comparative advantage. Now, however, war has broken out between them and all trade has stopped. Without trade, Freedonia produces and consumes 30 units of corn and 20 units of wheat per year. Sylvania produces and consumes 20 units of corn and 30 units of wheat. By how much has the combined yearly output of the two countries declined?arrow_forwardConsider two countries, the U.S. and Bangladesh, trading two goods, shoes and food. There are two factors of production, labor and capital. Assume that the production of shoes is relatively more capital intensive than the production of food in the U.S. Instead, the production of shoes is relatively more labor intensive in Bangladesh than the production of food. Assume that the U.S. is the capital abundant country and that Bangladesh is labor abundant. Both goods are produced by both countries in equilibrium. Illustrate the initial factor prices and factor intensities in a carefully drawn and labeled diagram with capital on the y-axis and labor on the x-axis, and indicate the cone(s) of diversification. Assume that the world price of shoes declines, but that both countries' continue to produce both goods. Illustrate the effect of this change in either the same or a new diagram. How do the real returns to both factors change in the two countries? Explain whether your findings are…arrow_forward
- If a country closes off to trade and notices that the number of firms in an industry doubles in size, what economic theory would help us explain this phenomenon? A. Stolper-Samuelson. B. Melitz. C. Ricardian. D. Cournot. Explain your answer in up to 200 words and using a diagramarrow_forwardSuppose that a worker in Caninia can produce either 2 blankets or 8 meals per day, and a worker in Felinia can produce either 5 blankets or 1 meal per day. Each nation has 10 workers. For many years, the two countries traded, each completely specializing according to their respective comparative advantages. Now war has broken out between them and all trade has stopped. Without trade, Caninia produces and consumes 10 blankets and 40 meals per day and Felinia produces and consumes 25 blankets and 5 meals per day. The war has caused the combined daily output of the two countries to decline by __________?arrow_forwardSuppose the United States can produce cars at an opportunity cost of two computers for each car it produces. Suppose Mexico can produce cars at an opportunity cost of eight computers for each car it produces. Discuss how both countries can gain from free trade.arrow_forward
- Suppose that in a week an American worker can produce 60 shirts or 4 computers and a Canadian worker can produce 60 shirts or 5 computers. The country that specializes in computers will trade 1 computer in exchange for at least shirts. The country that buys the computer will pay not more than shirts. Enter whole numbers.arrow_forwardThe table below shows the maximum quantities of two goods that each country can produce. If the countries follow the principle of comparative advantage, which of the following is a potential benefit of trade? Vibranium (tons) Gold (tons) Wakanda 8 tons 2 tons Zamunda 2 tons 1 ton Group of answer choices Trade can allow each country to increase consumption beyond its production possibilities frontier. Trade can allow each country to shift its production possibilities frontier outward to higher levels of production. Trade can allow each country to become less vulnerable to the actions of the other country. All of these answers are correct.arrow_forwardCreate a diagram similar to Figure 1.4 in which demand in both countries is identical and trade arises because of differences in supply. Do another diagram in which supply is identical across nations but differences in demand lead to trade.arrow_forward
- Consider the following model of trade between Home and Foreign. Assume throughout that those two countries are the only two countries in the world, at least for purposes of trade. There are two goods: Corn and Radio. Consumers always spend one-third of their income on Corn and the remainder on Radios. The only factor of production is labour. Each home country worker can produce 2 units of Corn or 3 units of Radios per unit of time, while each foreign worker can produce 2 units of Corn or 4 units of Radios per unit of time. There are 30 workers in Home and 60 workers in Foreign. Which country has a comparative advantage in Radios? In Corn?arrow_forwardConsider the following model of trade between Home and Foreign. Assume throughout that those two countries are the only two countries in the world, at least for purposes of trade. There are two goods: Corn and Radio. Consumers always spend one-third of their income on Corn and the remainder on Radios. The only factor of production is labour. Each home country worker can produce 2 units of Corn or 3 units of Radios per unit of time, while each foreign worker can produce 2 units of Corn or 4 units of Radios per unit of time. There are 30 workers in Home and 60 workers in Foreign. Find the autarky relative price of Radios in both countries (i.e., the price of Radio divided by the price of Corn).arrow_forwardConsider a hypothetical world with two countries: Country A and Country B. Both countries produce computers and televisions. Assume that consumers in both countries desire both these goods and that consumers and producers cannot differentiate between computers and televisions from either country. The production in each country before trade is shown in the table below. Production before trade: Country Computer Production Television Production Country A 3,000 1,800 Country B 1,200 1,000 Total 4,200 2,800 Suppose that each country transfers some amount of resources toward its area of comparative advantage. The production in each country after the countries started trade is as follows: Production after Trade Country Computer Production Television Production Country A 4,000 1,200 Country B 600 2,000 Total 4,600 3,200 Determine the range for the quantity of computers exchanged for televisions that will benefit both countries. Note that a country will…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc