ESSENTIALS OF ECONOMICS
11th Edition
ISBN: 9781260225334
Author: SCHILLER
Publisher: RENT MCG
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Question
Chapter 1, Problem 6QFD
To determine
The reason behind North Korea not reducing military expenditure and putting more resources in food production. Also, ascertain the optimal mix of guns and butter.
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The United States and Canada have the production possibilities curves shown above. It is determined that the United States has the comparative advantage in peanuts. Will both nations gain from trade if the terms of trade that are offered are 1 Peanut= 3 Corn? Why or why not? Show your work.
The principle of comparative advantage suggests that, if New York and Florida exchange taxi parts for oranges, each state will be made worse off.
I don't understand the second part of this homework. If Frankie and Johnny completely specialize according to comparative advantage, what will happen to the amount of eggs and milk? I have the opportunity cost calculated to understand who should do what in this case. But what will I do to that number?
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- When countries specialize based on their comparative advantage and trade with each other, how does it lead to gains from trade for both countries (even if one country has an absolute advantage in both goods)?arrow_forwardIn the past, comparative advantages have sometimes shifted from one nation to another. What factors do you think caused these shifts? Why? Was there anything a nation could have done to prevent an advantage from shifting to another nation?arrow_forwardUS and South Korea reached formal agreement on a plan to lift S. Korea’s long ban on US beef exports. What type of policy was S. Korea’s banning of US beef and why (other than fear of contaminated beef – mad cow disease) did S. Korea do this? Use offer-curve analysis to discuss the effects of this policy change. How does your answer change with your assumption as to whether S. Korea is a large or small country?arrow_forward
- A) Which producer has the comparative advantage in producing puzzles? Geppetto or Lewis B) Which producer has the comparative advantage in producing puppets? C) If both producers decided to trade with each other to stock their toy stores, which of the following is a range of terms of trade that would benefit both Geppetto and Lewis (1 puppet = x puzzles)? Please explain to me how to solve those questions. Don't just give me the answers. Thank you so much!arrow_forwardWhich country has a comparative advantage in the production of wine?arrow_forwardSuppose that an hour of work in Brazil can produce 1 pound of coffee or 4 pounds of sugar. In Colombia, an hour of work produces 2 pounds of coffee or 5 pounds of sugar. Which country has the absolute advantage in coffee? In sugar? Calculate the opportunity cost of each good in each country. Which country has the comparative advantage in each good? Why? What would be a mutually beneficial terms of trade?arrow_forward
- The figure below depicts the production possibilities curve (PPC) of a country. It also depicts the consumption possibilities curve (CPC) when the country is engaged in trade with one other country. Point C is this country's consumption when that trade occurs. Quantity of 350 good y 300 250 200 150 100 50 0 0 20 40 19 C 60 80 100 120 Quantity of good x Calculate how much this country trades with the other country in good y when the two countries engage in free trade. Enter a whole number only. Enter a positive number if this country exports good y, and a negative number if it imports it. Enter O if the answer cannot be obtained with the information given. Since this is a graphical question, approximate answers (within 20 of the exact answer) are accepted. Hint: consider how much the country produces and consumes this good.arrow_forwardThe table below shows the maximum quantities of two goods that each country can produce. If the countries follow the principle of comparative advantage, which of the following is a potential benefit of trade? Vibranium (tons) Gold (tons) Wakanda 8 tons 2 tons Zamunda 2 tons 1 ton Group of answer choices Trade can allow each country to increase consumption beyond its production possibilities frontier. Trade can allow each country to shift its production possibilities frontier outward to higher levels of production. Trade can allow each country to become less vulnerable to the actions of the other country. All of these answers are correct.arrow_forwardIn August 1990, many countries decided to retaliate against Iraq for invading Kuwait by refuse to trade with Iraq. What would happen to Iraq's terms of trade and volume of trade If Iraq is in the "inelastic" portion of its offer curve ? Please answer the question with explanation and graph and put Iraq's import good on x-axis.arrow_forward
- Country A can produce either 200 personal computers or 800 tons of potatoes with the same amount of resources. Country B can produce either 500 personal computers or 1,000 tons of potatoes with the same amount of resources. 1) which country has the absolute advantage in PC? which country has the absolute advantage in potato? 2) which country has the comparative advantage in PC? which country has the comparative advantage in potato? 3) Any trading ratio between which two ratios (of PC to potato) would benefit both countries? 4) Assuming the trading ratio is "PC: tons of potatoes = 1:3". If Country A only produces PC and Country B only produces potato, when they trade, I.) how many extra tons of potatoes can Country A obtain, comparing to the scenario in which Country A produces potato by itself? II.)how many extra PCs can Country B obtain, comparing to the scenario in which Country B produces PC by itself?arrow_forwardSuppose that an hour of work in Germany can produce 5 pastries or 4 sausages. In Denmark, an hour of work produces 4 pastries or 3 sausages. Which country has the absolute advantage in pastries? In sausages? Calculate the opportunity cost of each good in each country. Which country has the comparative advantage in each good? Why? What would be a mutually beneficial terms of trade?arrow_forwardIf Italy is said to have an absolute advantage over the United States in the production of wheat, this means that, given the same resources, the United States must have a comparative advantage over Italy in the production of wheat. Italy must have an absolute advantage over the United States in producing all goods. the United States must have an absolute advantage in producing some good other than wheat. Italy can produce more wheat than the United States. Italy has an absolute advantage in all goods that are complements to wheat.arrow_forward
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