Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 33, Problem 29P
France and Tunisia both have Mediterranean climates that are excellent for producing/harvesting green beans and tomatoes. In France it takes two hours for each worker to harvest green beans and two hours to harvest a tomato. Tunisian workers need only one hour to harvest the tomatoes but four hours to harvest green beans. Assume there are only two workers, one in each country, and each works 40 hours a week.
- Draw a production possibilities frontier for each country. Hint: Remember the
production possibility frontier is the maximum that all workers can produce at a unit of time which, in this problem, is a week. - Identify which country has the
absolute advantage in green beans and which country has the absolute advantage in tomatoes. - Identity which country has the
comparative advantage . - How much would France have to give up In terms of tomatoes to
gain from trade ? How much would it have to give up in terms of green beans?
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Students have asked these similar questions
(Parts a-c) Assume two countries, Gisslovia and Gerardania, both have 1200 units of labor that can be used to produce food or clothing. In Gisslovia it takes 4 units of labor to produce one unit of food and 3 units of labor to produce one unit of clothing. In Geradania it takes 3 units of labor to produce one unit of food and 2 units of labor to produce one unit of clothing.
a) If each country allocated one-half of its labor to food production how much food would be produced?
b) If each country allocated one-half of its labor to clothing production how much clothing would be produced?
c) Suppose Gisslovia only produced food. If Gerardania produced enough food to keep the total amount equal to part a, how much clothing would they produce?
Suppose that in a year an American worker can produce 60 shirts or 30 computers and a Chinese worker can produce 60 shirts or 12 computers.
There are 1 million workers in each country.
Use the blue line (circle symbol) to graph the production possibilities frontier (PPF) for the United States, and use the green line (triangle symbol) to
graph the production possibilities frontier for China.
Quantity of Computers (Millions)
30
27
24
21
18
15
12
9
6
3
0
0
10
20
30 40 50 60 70
Quantity of Shirts (Millions)
80 90 100
If these countries were open to trade,
U.S. PPF
O True
O False
China PPF
U.S. without Trade
Suppose that without trade the workers in each country spend half their time producing each good.
True or False: There are no longer gains from trade.
*
Use the black point (plus symbol) to indicate this production and consumption point for the United States, and use the grey point (star symbol) to
indicate this production and consumption point for China.
China without Trade
would…
Suppose that in a year an American worker can produce 60 shirts or 30 computers and a Chinese worker can produce 60 shirts or 12 computers. There are 1 million workers in each country. Use the blue line (circle symbol) to graph the production possibilities frontier (PPF) for the United States, and use the green line (triangle symbol) to graph the production possibilities frontier for China. Quantity of Computers (Millions) 30 27 24 21 18 15 12 9 6 3 0 PR 0 10 20 30 70 40 50 60 Quantity of Shirts (Millions) 80 90 100 U.S. PPF A China PPF + U.S. without Trade China without Trade 4
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Chapter 33 Solutions
Principles of Economics 2e
Ch. 33 - True or False: The source of comparative advantage...Ch. 33 - Brazil can produce 100 pounds of beef or 10 autos....Ch. 33 - In France it takes one worker to produce one...Ch. 33 - In Germany it takes three workers to make one...Ch. 33 - How can there be any economic gains for a country...Ch. 33 - Table 33.15 shows how the average costs of...Ch. 33 - If the removal of trade banters is so beneficial...Ch. 33 - What is absolute advantage? What is comparative...Ch. 33 - Under what conditions does comparative advantage...Ch. 33 - What factors does Paul Krugman identity that...
Ch. 33 - Is it possible to have a comparative advantage in...Ch. 33 - How does comparative advantage lead to gains from...Ch. 33 - What is intra-industry trade?Ch. 33 - What are the two main sources of economic gains...Ch. 33 - What is splitting up the value chain?Ch. 33 - Are the gains from international trade more likely...Ch. 33 - Are differences in geography behind the...Ch. 33 - Why does the United States not have an absolute...Ch. 33 - Look at Exercise 33.2. Compute the opportunity...Ch. 33 - You just overheard your friend say the following:...Ch. 33 - Look at Table 33.9. Is there a range of trades for...Ch. 33 - You just got a job in Washington, D.C. You move...Ch. 33 - Does intra-industry trade contradict the theory of...Ch. 33 - Do consumers benefit from intra-industry trade?Ch. 33 - Why might intra-industry trade seem surprising...Ch. 33 - In World Trade Organization meetings, what do you...Ch. 33 - Why might a low-income country put up barriers to...Ch. 33 - Can a nations comparative advantage change over...Ch. 33 - France and Tunisia both have Mediterranean...Ch. 33 - In Japan, one worker can make 5 tons of rubber or...Ch. 33 - Review the numbers for Canada and Venezuela from...Ch. 33 - In Exercise 33.31, is there an ask where...Ch. 33 - From earlier chapters you will recall that...Ch. 33 - Consider two countries: South Korea and Taiwan....Ch. 33 - If trade increases world GDP by 1 per year, what...
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- Review the numbers for Canada and Venezuela from Table 33.12 which describes how many barrels of oil and tons of lumber the workers can produce. Use these numbers to answer the rest of this question. Draw a production possibilities frontier for each country. Assume there are 100 workers in each country. Canadians and Venezuelans desire both oil and lumber. Canadians want at least 2,000 tons of lumber. Mark a point on their production possibilities where they can get at least 3,000 tons. Assume that the Canadians specialize completely because they figured out they have a comparative advantage in lumber. They are willing to give up 1,000 tons of lumber. How much oil should they ask for in return for this lumber to be as well off as they were with no trade? How much should they ask for if they want to gain from trading with Venezuela? Note: We can think of this ask as the relative price or trade price of lumber. Is the Canadian ask you identified in (b) also beneficial for Venezuelans? Use the production possibilities frontier graph for Venezuela to show that Venezuelans can gain from trade.arrow_forwardThe U.S. and Mexico both produce vehicles and tons of plastic, which are sold for the same price in both countries. Suppose that with one unit of labor and one unit of capital, the U.S. can produce either 20 vehicles or 43 tons of plastic and Mexico can produce either 10 vehicles or 18 tons of plastic. What is the opportunity cost of producing one vehicle (in terms of tons of plastic) for the U.S.?arrow_forwardFrance and Tunisia both have Mediterranean climates that are excellent for producing/harvesting green beans and tomatoes. In France it takes two hours for each worker to harvest green beans and two hours to harvest a tomato. Tunisian workers need only one hour to harvest the tomatoes but four hours to harvest green beans. Assume there are only two workers, one in each country, and each works 40 hours a week. Draw a production possibilities frontier for each country.arrow_forward
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