The fictional country of Tomczakistan is a nation that is relatively rich in labor resources. It can produce two types of goods, capital-intensive goods and labor-intensive goods. Tomczakistan's production possibilities frontier (PPF) is shown on the following graph. Currently, Tomczakistan is closed to international trade and producing at the grey point (star symbol) labeled A on the graph. Suppose that Tomczakistan is going to trade with Leightvania, a country that is relatively rich in capital and was also previously closed to international trade. On the following graph, use the green point (triangle symbol) to indicate which way Tomczakistan will adjust its production by placing it on one of the two black points (plus symbol). Dashed droplines will automatically extend to both axes. LABOR-INTENSIVE GOODS 10 9 8 1 0 0 1 + 2 1 5 6 3 4 7 CAPITAL-INTENSIVE GOODS 8 Once trade begins, the price of capital in Tomczakistan 9 10 New Production (?) In Leightvania, the price of capital

The fictional country of Tomczakistan is a nation that is relatively rich in labor resources. It can produce two types of goods, capital-intensive goods and labor-intensive goods. Tomczakistan's production possibilities frontier (PPF) is shown on the following graph. Currently, Tomczakistan is closed to international trade and producing at the grey point (star symbol) labeled A on the graph. Suppose that Tomczakistan is going to trade with Leightvania, a country that is relatively rich in capital and was also previously closed to international trade. On the following graph, use the green point (triangle symbol) to indicate which way Tomczakistan will adjust its production by placing it on one of the two black points (plus symbol). Dashed droplines will automatically extend to both axes. LABOR-INTENSIVE GOODS 10 9 8 1 0 0 1 + 2 1 5 6 3 4 7 CAPITAL-INTENSIVE GOODS 8 Once trade begins, the price of capital in Tomczakistan 9 10 New Production (?) In Leightvania, the price of capital

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter19: International Trade

Section: Chapter Questions

Problem 3QFR

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Currently, Tomczakistan is closed to international trade and producing at the grey point (star symbol) labeled A on the graph. Suppose that Tomczakistan is going to trade with Leightvania, a country that is relatively rich in labor and was also previously closed to international trade. On the following graph, use the green point (triangle symbol) to indicate which way Tomczakistan will adjust its production by placing it on one of the two black points (plus symbol). Dashed droplines will automatically extend to both axes. (?) LABOR-INTENSIVE GOODS 10 9 8 SO 01 1 0 0 1 + 2 + 3 + 4 5 6 7 CAPITAL-INTENSIVE GOODS A 8 Once trade begins, the price of capital in Tomczakistan 9 10 New Production . In Leightvania, the price of capital
Consider a region with two export products (gloves and socks) and two local goods (tattoos and manicures). The production of each export good is subject to localization economies, so each city specializes in one export good. According to Mr. Wizard, “If my two assumptions (one for export products and one for local goods) are correct, all the cities in the region will be the same size.” Assume that Mr. Wizard’s logic is correct. List his assumptions and explain why together they imply the region’s cities will be the same size.
Consider 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…
Given the information as follows: Consider the following model of trade between Vietnam and France. Assume throughout that those two countries are the only two countries in the world, at least for purposes of trade. There are two goods: Rice and Beef. Consumers always spend 1/4 of their income on rice and the remainder on beef. The only factor of production is labor. Each Vietnamese worker can produce 2 unit of Rice or 1 unit of beef per unit of time, while each French worker can produce 1 units of rice or 3 units of beef per unit of time. There are 100 million workers in Vietnam and 70 million in France. a. Determine the product brings higher wealth to each country. b. Determine the pattern of trade for both countries using Ricardian model. Draw the world relative supply curve. c. What is the benefit of each country when joining international trade following Ricardian model? Draw the graph to clarify your idea.
Suppose 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?
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?
Q6. Production possibilities frontier, gains from trade, comparative advantage, absolute advantage, and returns to scale. Suppose that there are two countries, A and B. The production possibilities frontier of country A is given by coconuts A + √fish = 8, and the production possibilities frontier of country B is given by coconuts B + √fishB = 8 where coconuts, denotes the amount of coconuts produced by country i and fish, denotes the amount of fish produced by country i. Assume that the utility function of each country i is given by the expression U (coconutsi, fishi) = min (coconutsi, fishi) where coconuts, denotes the amount of coconuts consumed by country i and fish, is the amount if fish consumed by country i. Suppose that all gains from trade are divided equally between the countries. Determine the utility of each country when the agents can trade. Write the utility of country A here and provide a detailed explanation below. and the utility of country B here
Consider a hypothetical world with two countries: Country A and Country B. Each country has 45 workers, who produce cars and bicycles. If Country A shifts all its workers to one good, it can produce 1,350 cars or 2,520 bicycles. Under the same conditions, Country B can produce 1,710 cars or 2,880 bicycles. Therefore, Country B has an absolute advantage in producing both goods. Nevertheless, the two countries decide to trade, so each shift production to their areas of comparative advantage. Determine which good Country A will specialize in. Then, calculate the quantity of this good the country will produce after trade if only 40 workers are involved. If necessary, round any intermediate calculations to two decimal places and your final answer to the nearest whole number.
The graph on the right shows Tanzania's production possibilities frontier for cashew nuts and mangoes. Assume that the output per hour of work is 8 bushels of cashew nuts or 2 bushels of mangoes, and that Tanzania has 1,000 hours of labor. Without trade, Tanzania evenly splits its labor hours between cashews and mangoes and produces and consumes at point A. Suppose Tanzania opens trade with Kenya, and Kenya's output per hour of work is 1 bushel of cashew nuts or 1 bushel of mangoes. Having the comparative advantage, Tanzania completely specializes in cashew nuts. Locate the point of production for Tanzania. bushels of mangoes and bushels of cashew The point of production for Tanzania includes nuts. (Enter your responses as whole numbers.) Suppose Tanzania keeps 5,000 bushels of cashew nuts and exports the remaining 3,000 bushels. The terms of trade are 1 bushel of mangoes for 2 bushels of cashew nuts. Locate the point that shows the amount of cashew nuts and mangoes that Tanzania…
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.
1. You are given the following hypothetical scenario: Two countries, Country A and Country B. Country A is capital abundant, and Country B is labor abundant. Both countries consume and produce iron and leather. Iron is capital intensive and leather is labor intensive. Using a graphical representation of Country B, explain the two components of the gains from Trade.