Microeconomics
11th Edition
ISBN: 9781260507041
Author: Colander, David
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 9, Problem 3QE
(a)
To determine
The trade between Nebraska and Lowa.
(b)
To determine
Identify the amount that trader gets.
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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.…
Suppose that Portugal and Austria both produce rye and cheese. Portugal's opportunity cost of producing a pound of cheese is 5 bushels of rye while
Austria's opportunity cost of producing a pound of cheese is 10 bushels of rye.
By comparing the opportunity cost of producing cheese in the two countries, you can tell that
has a comparative advantage in the
production of cheese and
has a comparative advantage in the production of rye.
Suppose that Portugal and Austria consider trading cheese and rye with each other. Portugal can gain from specialization and trade as long as it
receives more than
of rye for each pound of cheese it exports to Austria. Similarly, Austria can gain from trade as long as it
receives more than.
of cheese for each bushel of rye it exports to Portugal.
Based on your answer to the last question, which of the following prices of trade (that is, price of cheese in terms of rye) would allow both Austria and
Portugal to gain from trade? Check all that apply.
O 9…
Two countries, Nicaragua and Argentina can both produce bananas and wheat. Their production possibility frontiers are shown below. Based on this we can say that Nicaragua has a comparative advantage in producing__________. Both countries can gain from trade if Nicaragua produces___________ and Argentina produces __________ and trade.
Bananas; bananas; wheat.
Bananas; wheat; bananas.
Wheat; wheat; bananas
Wheat, bananas; bananas
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
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- In Country T, it takes 10 resources to produce 1 ton of cocoa and 13.5 resources to produce 1 ton of rice. In Country Y, it takes 40 resources to produce 1 ton of cocoa and 20 resources to produce 1 ton of rice. Country T has a comparative advantage over Country Y in cocoa. This follows the theory of comparative advantage, and we can say that engaging in free trade benefits all countries that participate in it; however, this conclusion stems from which of these inaccurate assumptions? Multiple Choice We have assumed constant returns to scale. We have assumed the prices of resources and exchange rates in the two countries are dynamic. We have assumed there are barriers to the movement of resources from the production of one good to another within the same country. We have assumed that agrarian nations do not specialize in producing particular products. We have assumed diminishing returns to specialization.arrow_forwardSuppose that Greece and Sweden both produce oil and cheese. Greece's opportunity cost of producing a pound of cheese is 4 barrels of oil while Sweden's opportunity cost of producing a pound of cheese is 10 barrels of oil. By comparing the opportunity cost of producing cheese in the two countries, you can tell that has a comparative advantage in the production of cheese and has a comparative advantage in the production of oil. Suppose that Greece and Sweden consider trading cheese and oil with each other. Greece can gain from specialization and trade as long as it receives more than of oil for each pound of cheese it exports to Sweden. Similarly, Sweden can gain from trade as long as it receives more than of cheese for each barrel of oil it exports to Greece. Based on your answer to the last question, which of the following prices of trade (that is, price of cheese in terms of oil) would allow both Sweden and Greece to gain from trade? Check all that apply.…arrow_forward*** Which of the following statements about production and trade is FALSE? 1. If a country has an absolute advantage in producing a good, then it also has the comparative advantage in the production of that good. II. Rich countries will generally have the comparative advantage in the production of all goods. III. If a country has the absolute advantage in the production of a good, then this country will be made better off by specializing in the production of that good. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. b C d Specialization and Trade Q4 Homework Answered *** I only. I and II only. I, II and III. Ill only. Answered-Incorrect 1 attempt left Specialization and Trade Q9 Homework Unanswered X Your answer Resubmitarrow_forward
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