Country X has a comparative advantage in producing paper and country Y has a comparative advantage in producing watches. The two countries, however, decide not to specialize and trade. What could explain this decision? (Pick either a, b, c or d) a) there is perfect mobility of factors of production between the countries b) trade is based on absolute rather than comparative advantage c) transport costs are low relative to the opportunity cost differences between the countries d) The exchange rate lies within the countries opportunity cost ratio
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- Background Information Assume that you have been hired by an International Organization to be consulted on various issues that the country Motherland faces. For this exercise, assume that Motherland is a small agricultural economy. Part A. Assume that the biggest trading partner of Motherland is the United States. Unlike Motherland, the United States is a large industrial country. What type of trade model can best explain the trade between Motherland and the United States? Explain your answer in no more than 200 words. Part B. Motherland imports electronics from the United States. The government of Motherland is considering to impose quotas on these electronics imports coming from the United States. Would you recommend it? Explain your answer. In your explanation, distinguish the effect on the consumers of electronics, the domestic producers of electronics and the government. Your explanation should not exceed 200 words. Part C. The government of Motherland wants to jump start…Suppose there are two countries Peru and Japan that produce Food and Fuel. Peru can produce 7,523 units of Food or 17,853 units of Fuel using a labour force of 8000. Japan can produce 5,733 units of Food or 24,156 units of Fuel using a labour force of 5000. (g) If the terms of trade is 2 to 1 in favour of the country with the comparative advantage in food. Determine the combination of the two goods that each country will consume after trade if the country with the comparative advantage in fuel imports 4000 units of food. Label this point B and B* respectively. h) Who gains from trade? Who loses? What is the impact if any on the world? (i) What should the terms of trade be to make trade beneficial for BOTH Japan and Peru? Explain.*** 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 Resubmit
- international trade theory An economy grows and the country wants to trade more after the growth. What can we expect happens to the terms of trade in this case, assume that the growth is caused by a proportionally greater increase in the supply of labour than of capital and that the growth in labour is larger than the economic growth?QUESTION 5 There are two countries: A and B. Here, we consider the trade equilibrium with transportation costs. There are four homogeneous goods and one input (labor). Unit labor requirements are given in the following table. In addition, the free-trade wage rate in A is $1, and that in B is $2. Finally, we assume it costs $2 to transport goods from the other country. Which product(s) will not be traded between the two countries? Textile Fish Units of labor required per unit of output A Soybean Corn Textile, fish, soybean, and corn Fish O Fish and soybean O Soybean 975 5 3 B 2 3 3 4Question 2 [Soalan 2] The following graph shows the effect of free trade on the domestic quantities demanded and supplied of good A in a small nation. [Graf berikut menunjukkan kesan perdagangan bebas terhadap kuantiti diminta dan ditawarkan bagi barang A dalam sebuah negara yang kecil.] P (RM) , 800 0. Q (units) 1,000 Suppose that under free trade, the country imports 1,500 units of good A, and the world price is RM450, calculate how many units of good A the country consumes. (Diandaikan bahawa dalam perdagangan bebas, negara tersebut mengimpot 1.500 unit barang A, dan harga dunia adalah RM450, kirakan berapa unit barang A yang digunakan oleh negara tersebut.] SI
- Which of the following best explains the concept of "Comparative Advantage" in international trade? a) A country should produce goods in which it has an absolute advantage and trade for those where it does not. b) A country should only export goods and import nothing to maintain a positive trade balance. c) A country should specialize in the production of goods for which it has the lowest opportunity cost compared to other countries. d) A country should diversify its production across various sectors to avoid dependence on a single export commodity.2) Under what conditions does comparative advantage lead to gains from trade? b) What is splitting up the value chain?мсаз Austria can produce 1 unit of food using 12 hours of labour time and 1 unit of machinery using 4 hours. In Greece it takes 8 hours of labour time to produce 1 unit of food and 4 hours to produce 1 unit of machinery. These productivity conditions imply: A I do not want to answer this question. Austria has an absolute advantage in machinery production C Greece has an absolute advantage in machinery production Austria has a comparative advantage in machinery production E Neither country has a comparative advantage in machinery production F Greece has a comparative advantage in machinery production
- Country A can produce gadgets at a lower opportunity cost than any other producer of gadgets. As a result Country A must have . a) a superior gadget making technology b) an absolute advantage in gadget production c) a comparative advantage in gadget production d) a constant opportunity cost associated with gadget production e) more factors of production devoted to gadget production than any other countryInternational Trade Suppose the production of chocolate and wine per hour of labor in Italy and France is as follows: Chocolate (C) Wine (W) Italy (I) 8 bars 4 bottles France (F) 6 bars 2 bottles a) Which country has the absolute advantage in chocolate production? Does the same country also have the comparative advantage in chocolate production? Explain your answers. b) Suppose that with free trade the price of one bottle of wine is 2.5 bars of chocolate. Further suppose that 100 million hours of labor are available in both countries. Carefully draw the production possibility curves in each country both with and without free trade. With reference to the graphs, briefly explain in words how free trade can help both countries become better off.Which of the following is not a use of the concept of terms of trade? Select one: a. Gains from trade may be analyzed b. Domestic inflation may be estimated c. The causes for price changes may be analyzed d. Current price trends may be analyzed e. Changes in prices may be forecasted