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- True or False: The source of comparative advantage must be natural elements like climate and mineral deposits. Explain.According to David Ricardo, O A. If countries specialize where they have an absolute advantage and trade, their efficiency and standard of living can improve O B. Countries should strive to develop their absolute advantage to benefit from trade with other countries O C. If countries specialize where they have a comparative advantage and trade, all groups in their economies will benefit equaly OD. If countries specialize where they have a comparative advantage and trade, their efficiency and standard of living can improveIf all countries follow a policy of free trade, economists predict that O a. each country will export goods at which it has a comparative advantage at producing and import goods at which it has a comparative disadvantage at producing Ob each country will export goods at which it has a comparative disadvantage at producing and import goods at which it has a comparative advantage at producing Oc there will be no trade between countries - that is, no international trade taking place Od rich countries will be made poorer by trade with poor countries O e. poor countries will be made even poorer by trade with rich countries
- Explain how the gains from trade followfrom comparative advantage.Suppose that Congress imposes a tariff on importedautomobiles to protect the U.S. auto industry fromforeign competition. Assuming that the United Statesis a price taker in the world auto market, show thefollowing on a diagram: the change in the quantityof imports, the loss to U.S. consumers, the gainto U.S. manufacturers, government revenue, andthe deadweight loss associated with the tariff. Theloss to consumers can be decomposed into threepieces: a gain to domestic producers, revenue forthe government, and a deadweight loss. Use yourdiagram to identify these three pieces.Which of the following is proof that international trade is beneficial? O the fact that different regions in the United States specialize in different products O the international trade in exotic products O the sheer volume of trade between very different nationsswer text provided. O the concept of absolute advantage
- Canada exports canola oil to Japan. Therefore, Japan must have the comparative advantage in the production of canola oil, and its autarkic price is higher than the free trade price. O Japan must have the comparative advantage in the production of canola oil, and its autarkic price is lower than the free trade price. Canada must have the comparative advantage in the production of canola oil, and its autarkic price is higher than the free trade price. Canada must have the comparative advantage in the production of canola oil, and its autarkic price is lower than the free trade price.Two countries, Korea and Vietnam, are engaging in international trade.They produce two goods: automobiles and cloth. We observe a relativeabundance of cheap labor in Vietnam and a relative abundance of capitalin South Korea. a. Assume that automobiles are capital-intensive and cloth are cheaplabor-intensive. Using the Hecksher-Ohlin theory, explain what willhappen in trade between these two countries, in terms of export andimport. c. Draw a graph that shows the above situation in South Korean economy with a P P F and two relative prices (one before trade and theother after trade). The quantity of automobiles (QAuto) is on thehorizontal axis and the quantity of cloth (QCloth) is on the verticalaxis.Assume, for Vietnam, that the domestic price of textiles without international trade is lower than the world price of textiles. This suggests that, in the production of textiles, O Vietnam has a comparative advantage over other countries and Vietnam will export textiles. O other countries have a comparative advantage over Vietnam and Vietnam will export textiles. O other countries have a comparative advantage over Vietnam and Vietnam will import textiles. O Vietnam has a comparative advantage over other countries and Vietnam will import textiles. MacBook A esc D00 FA F1 F2 F3 FS % 4 Q W E R T tab I A S D F G s lock
- 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 countriesThe fictional country of Anastialia is a small country with rich resources in minerals. In a day it can produce 100 pounds of silver or 50 pounds of copper. Another country, West Burma, can produce 25 pounds of silver or 5 pounds of copper in a day. From this data, which country has the comparative advantage in copper production by producing it at a lower opportunity cost? O Neither country has a comparative advantage. O Anastialia O West BurmaProduction Advantage and Opportunity CostsAssume there are two countries, the United States and France, and two goods, automobiles andcomputers.The table presented below shows the number of automobiles and computers that the United States andFrance can produce with the same amount of resources. France=100 automobiles and 55 computers United States=120 automobiles and 60 computers. 1.4 If free trade exists between the United States and France, what are the highest and lowestlevels for the price of an automobile (expressed in terms of computers)? Motivate youranswer by stating which level favours the United States and France