MICROECONOMICS (LL)-W/ACCESS >CUSTOM<
11th Edition
ISBN: 9781264207718
Author: Colander
Publisher: MCG CUSTOM
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Question
Chapter 9.1, Problem 5Q
To determine
Effects of law of one price in the transferable
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What is Comparative Advantage and how is it determined? Explain this concept in words.
The principle of comparative advantage does not provide answers to certain questions. One of those questions is
Do specialization and trade benefit more than one party to a trade?
Is it absolute advantage or comparative advantage that really matters?
How are the gains from trade shared among the parties to a trade?
Is it possible for specialization and trade to increase total output of traded goods?
What is the relationship between production costs and comparative advantage?
Group of answer choices
Comparative advantage considers, “How much am I giving up to produce this good in this country?”
Comparative advantage identifies the good for which the producer’s absolute advantage is relatively smaller.
Comparative advantage identifies where the producer’s absolute productivity disadvantage is relatively larger.
Comparative advantage happens when the production costs for both trading partners are the same.
Chapter 9 Solutions
MICROECONOMICS (LL)-W/ACCESS >CUSTOM<
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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- Explain the theory of comparative advantage. How realistic are the assumptions of this theory?arrow_forwardIs the following statement true or false? Please explain. "Everyone has a comparative advantage."arrow_forwardWhy is comparative advantage more important than absolute advantage in determining whether trade is beneficial?arrow_forward
- Why is it important that the country or region with the lower opportunity cost produce the good? How would you use the concept of comparative advantage to argue for reducing restrictions on trade between countries?arrow_forwardIs absolute advantage or comparative advantage more important for trade? Give an Examplearrow_forwardExplain the theory of comparative advantage using an example, and describe five (5) assumptions.arrow_forward
- Explain the difference between absolute advantage and comparative advantage. Which is more important in determining trade patterns, absolute advantage or comparative advantage? Why?arrow_forwardWhat are the impacts of comparative advantage and absolute advantage?arrow_forward1) Write a clearly positive economic statement referring to comparative advantage.Explain why is it a positive statement.arrow_forward
- Assume Indonesia and China are trading partners. Indonesia initially exports palm oil to and imports lubricants from China. Using the standard trade model, explain how an increase in the relative price of palm oil, in relation to lubricant prices, would affect production and consumption of palm oil for Indonesia (assuming that the taste for both goods is the same in both countries). If the income effect of price change of palm oil is greater than the substitution effect, what would happen to palm oil consumption in Indonesia?arrow_forwardTwo countries (Home and Foreign) use labor to produce two goods: Cloth and Wheat. The number of units of the good that can be produced by one unit of labor are given below. The number of units of labor in the Home And Foreign countries are 10 and 30, respectively. a) Calculate the opportunity costs of Cloth in the two countries, briefly describing your calculation. What are the goods in which the countries have comparative advantage? b) Use appropriate examples for world price and indifference curves to show that both Home and Foreign benefit from trade. Mention the world price, and the point where production and consumption occur in the two countries after trade. Wheat Cloth Home 12 3 Foreign 4 2arrow_forwardBob and Erik are both experienced in making pizzas and burgers. In one day, Bob can make 8 pizzas or 32 burgers. With the same effort and in the same day, Erik can make 12 pizzas or 36 burgers. Who has the absolute advantage in making pizzas and who has the absolute advantage in making burgers? Who has the comparative advantage in each activity? Show your derivations. According to the principle of comparative advantage, in which activity should each person (Bob and Erik) specialize in order to gain from trade? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward
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