5. The price of trade Suppose that Croatia and Slovakia both produce beets and liquor. Croatia's opportunity cost of producing a case of liquor is 6 bushels of beets while Slovakia's opportunity cost of producing a case of liquor is 11 bushels of beets. By comparing the opportunity cost of producing liquor in the two countries, you can tell that Croatia has a comparative advantage in the production of liquor and Slovakia has a comparative advantage in the production of beets. Suppose that Croatia and Slovakia consider trading liquor and beets with each other. Croatia can gain from specialization and trade as long as it receives more than of beets for each case of liquor it exports to Slovakia. Similarly, Slovakia can gain from trade as long as it of liquor for each bushel of beets it exports to Croatia. receives more than Based on your answer to the last question, which of the following prices of trade (that is, price of liquor in terms of beets) would allow both Slovakia and Croatia to gain from trade? Check all that apply. 8 bushels of beets per case of liquor 7 bushels of beets per case of liquor ☐ 1 bushel of beets per case of liquor 3 bushels of beets per case of liquor

5. The price of trade Suppose that Croatia and Slovakia both produce beets and liquor. Croatia's opportunity cost of producing a case of liquor is 6 bushels of beets while Slovakia's opportunity cost of producing a case of liquor is 11 bushels of beets. By comparing the opportunity cost of producing liquor in the two countries, you can tell that Croatia has a comparative advantage in the production of liquor and Slovakia has a comparative advantage in the production of beets. Suppose that Croatia and Slovakia consider trading liquor and beets with each other. Croatia can gain from specialization and trade as long as it receives more than of beets for each case of liquor it exports to Slovakia. Similarly, Slovakia can gain from trade as long as it of liquor for each bushel of beets it exports to Croatia. receives more than Based on your answer to the last question, which of the following prices of trade (that is, price of liquor in terms of beets) would allow both Slovakia and Croatia to gain from trade? Check all that apply. 8 bushels of beets per case of liquor 7 bushels of beets per case of liquor ☐ 1 bushel of beets per case of liquor 3 bushels of beets per case of liquor

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter33: International Trade

Section: Chapter Questions

Problem 30P: In Japan, one worker can make 5 tons of rubber or 80 radios. In Malaysia, one worker can make 10...

See similar textbooks

Similar questions

21. According to David Ricardo, O A. If countries specialize where they have a comparative advantage and trade, all groups in their economies will benefit equaly OB. If countries specialize where they have a comparative advantage and trade, their efficiency and standard of living can improve O C. If countries specialize where they have an absolute advantage and trade, their efficiency and standard of living can improve O D. Countries should strive to develop their absolute advantage to benefit from trade with other countries
In Japan, one worker can make 5 tons of rubber or 80 radios. In Malaysia, one worker can make 10 tons of rubber or 40 radios. Who has the absolute advantage in the production of rubber or radios? How can you tell? Calculate the opportunity cost of producing 80 additional radios in Japan and in Malaysia. (Your calculation may involve fractions, which is fine,) Which country has a comparative advantage in the production of radios? Calculate the opportunity cost of producing 10 additional tons of rubber in Japan and in Malaysia. Which country has a comparative advantage in producing rubber? In this example, does each country have an absolute advantage and a comparative advantage in the same good? In what product should Japan specialize? In what product should Malaysia specialize?
True or False: The source of comparative advantage must be natural elements like climate and mineral deposits. Explain.
3. Absolute and comparative advantage Consider two neighboring island countries, Charisma and Fiatstan. Each has 72,000 labor hours available per week that it can use to produce corn, jeans, or a combination of both. The following table shows the amount of labor hours required to produce 1 bushel of corn or 1 pair of jeans. Corn Jeans Country (Labor hours per bushel) (Labor hours per pair) Charisma 80 16 Fiatstan 24 12 has an absolute advantage in the production of corn, and has an absolute advantage in the production of jeans. Initially, suppose Charisma uses 54,000 hours of labor per week to produce corn and 18,000 hours per week to produce jeans, while Fiatstan uses 18,000 hours of labor per week to produce corn and 54,000 hours per week to produce jeans. Assume there are no other countries willing to trade goods, so in the absence of trade between these two countries, each country consumes the amount of com and jeans it produces. Charisma's opportunity cost of producing 1 bushel of…
3. Absolute and comparative advantage Consider two neighboring island countries, Charisma and Fiatstan. Each has 72,000 labor hours available per week that it can use to produce corn, jeans, or a combination of both. The following table shows the amount of labor hours required to produce 1 bushel of corn or 1 pair of jeans. Corn Jeans Country (Labor hours per bushel) (Labor hours per pair) Charisma 80 16 Fiatstan 24 12 has an absolute advantage in the production of corn, and has an absolute advantage in the production Neither country harisma uses 54,000 hours of labor per week to produce corn and 18,000 hours per week to produce jeans, while Fiatstan uses por per week to produce corn and 54,000 hours per week to produce jeans. Assume there are no other countries willing to trade sence of trade between these two countries, each country consumes the amount of corn and jeans it produces. Charisma Fiatstan
25. The countries of Mistania and Boonton each produce two goods: TVs and Computers. The table below lists the production for each good, for each country per year when each country uses half of their resources to produce each good. Country Production of TVs Production of Computers Mistania 175 Boonton 168 What is the opportunity cost of producing 1 TVs in Miscania Computers What is the opportunity cost of producing 1 TVs in Boonton Computers Which country has a comparative advantage in producing TV? Miscania OBoonton ONot enough information Which country has a comparative advantage in producing Computers? Mistania Boonton. ONot enough information If both countries decide to specialize and trade with each other, what would be the outcome? OConsumers in Mistania will not be able to purchase Computers anymore OProducers of Computers in Boonton will be lowering production Consumers in Mistania and Boonton can enjoy more at lower prices Consumers in Boonton will be the ones benefiting from…
5. The price of trade Suppose that Croatia and Liechtenstein both produce ale and liquor. Croatia's opportunity cost of producing a case of liquor is 4 kegs of ale while Liechtenstein's opportunity cost of producing a case of liquor is 12 kegs of ale. By comparing the opportunity cost of producing liquor in the two countries, you can tell that production of liquor and Liechtenstein has a comparative advantage in the production 0 Croatia Suppose that Croatia and Liechtenstein consider trading liquor and ale with each other. Croat Liechtenstein specialization and trade as long as it receives more than of ale for each case of liquor it exports to Liechtenstein. Simmary, Literienstein can gain from trade as long as it of liquor for each keg of ale it exports to Croatia. receives more than 0 Croatia Based on your answer to the last question, which of the following prices of trade (that is, price of liquor in terms of ale) would allow both Liechtenstein and Croatia to gain from trade? Check…
An automobile company has two factories, one in Vietnam and one in Australia, each with the same number of workers. The Vietnamese factory can produce either 150 engines or 100 transmissions per day. The Australian factory can produce either 200 engines or 150 transmissions per day. A. Which factory has an advantage is irrelevant since the theory of comparative advantage only applies to countries, not companies. B. The Australian factory has an comparative advantage in the production of transmissions. C. The Vietnamese factory has an absolute advantage producing both engines and transmissions. D. The Vietnamese factory has a comparative advantage in the production of transmissions.
Glacier has a comparative advantage in the production of a comparative advantage in the production of Congaree specialize in the production of the goods in which each After specialization, the two countries can produce a total of and million pounds of basil. Suppose that Glacier and Congaree agree to trade. Each country focuses its resources on producing only the good in which it has a comparative advantage. The countries decide to exchange 16 million pounds of corn for 16 million pounds of basil. This ratio of goods is known as the price of trade between Glacier and Congaree. The following graph shows the same PPF for Glacier as before, as well as its initial consumption at point A. Place a black point (plus symbol) on the graph to indicate Glacier's consumption after trade. Note: Dashed drop lines will automatically extend to both axes. BASIL (Millions of pounds) 64 56 BASIL (Millions of pounds) 48 40 32 24 16 8 0 64 56 40 0 48 PPF 24 8 PPF 0 8 0 16 The following graph shows the same…
7. What is the law of comparative advantage? According to the law of comparative advantage, what should be the distin- guishing characteristics of the goods a nation produces? What should be the distinguishing characteristics of the goods a na- tion imports? How will international trade influence people's production levels and living standards? Explain. 15
3. Gains from trade Consider two neighboring island countries called Bellissima and Felicidad. They each have 4 million labor hours available per week that they can use to produce rye, jeans, or a combination of both. The following table shows the amount of rye or jeans that can be produced using 1 hour of labor. Country Bellissima Felicidad Rye (Bushels per hour of labor) 8 5 Jeans (Pairs per hour of labor) 16 20 Initially, suppose Bellissima uses 1 million hours of labor per week to produce rye and 3 million hours per week to produce jeans, while Felicidad uses 3 million hours of labor per week to produce rye and 1 million hours per week to produce jeans. Consequently, Bellissima produces 8 million bushels of rye and 48 million pairs of jeans, and Felicidad produces 15 million bushels of rye and 20 million pairs of jeans. Assume there are no other countries willing to trade goods, so, in the absence of trade between these two countries, each country consumes the amount of rye and…
Table 3-21 Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. The following table shows the number of coolers or number of radios each country can produce in one day. Output Produced in One Day Coolers Radios lamaica 12 16 Norway 24 Refer to Table 3-21. At which of the following prices would both Jamaica and Norway gain from trade with each other? O a. 1 radio for 1 cooler O b. 1 radio for 4 coolers O c. 1 radio for 10 coolers O d. Jamaica and Norway would both gain from trade at all of the above prices.