a. Are comparative-cost conditions such that the two countries should specialize? If so, what product should each produce? b. What is the total gain in apparel and chemical output that would result from such specialization? c. What are the limits of the terms of trade? Suppose that the actual terms of trade are 1 unit of apparel for 1 unit of chemicals and 4 units of apparel for 6 units of chemicals. What are the gains from specialization and trade for each nation?
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- 5. Suppose that the comparative-cost ratios of two products- baby formula and tuna fish-are as follows in the hypotheti- cal nations of Canswicki and Tunata: Canswicki: 1 can baby formula = 2 cans tuna fish 1 can baby formula = 4 cans tuna fish Tunata: In what product should each nation specialize? Explain why terms of trade of 1 can baby formula = would be acceptable to both nations. 25 cans tuna fish21 公。 M * 00 LO The Mercantilists advocated balance of trade for each country engaged in trade. O True O False QUESTION 23 A nation is in disequilibrium if it consumes on the highest indifference curve possible given its production frontier. O True O False QUESTION 24 2 pof All groups in a country benefit from international trade in the short run. O True O False Save All Answers Save MAR 12 étv 280 006四 MacBook Air 08 F3 DD F 7 F1 F2 F 4 F5 F8 F11 & 23 2$ 4. 9. 6 E R. } P. S K. B. command command optionSuppose that the opportunity cost ratio for apples and oranges is 1AE =30 in Germany but 10= 2A in Japan At which of the following international eschange ratios (terms of trade) with Gemany andJapan be willing to specialize and engage in trade with each otherO10=215AO 10= 1.25AO 10=0.25AO 10=0.15A
- In a two-country, two-product world, the statement 'Germany enjoys a comparative advantage over France in cars relative to ships' is equivalent to O a. a. Germany having a comparative advantage over France in cars and ships. O b. France having a comparative disadvantage compared to Germany in cars and ships. O c. France having no comparative advantage over Germany. O d. France should produce cars. O e. France having a comparative advantage over Germany in ships. LIn Country A, the production of 1 bicycle requires using resources that could otherwise be used to produce 11 lamps. In Country B, the production of 1 bicycle requires using resources that could otherwise be used to produce 15 lamps. Which country has a comparative advantage in making bicycles? LO26.2 a. Country A. b. Country BPoland requires 4 hours of labor to produce 1 ton of coal and 1 hour of labor to produce a bushel of wheat. The Czech Republic requires 6 hours of labor to produce 1 ton of coal and 1 hour of labor to produce a bushel of wheat. Suppose that Poland has 1,000 hours of labor and that it completely specializes according to its comparative advantage. How many units of which product will it produce? 250 tons of coal 1,000 bushels of wheat O100 bushels of wheat 4,000 tons of coal One of the main reasons for China to actively invest in foreign companies is to enhance the competitiveness of Chinese firms globally. take advantage of low wages in foreign countries. Omake best use of its technological expertise in the world market. meet the growing demand of the high population in China.
- The Ricardian theory of Comparative advantage relates to O Intermediate Outcome Short-run Outcome All the above O Long-run OutcomeFor the large-country in the graph, the free-trade price of the product is Price $25 $20 $15 10 O $15; 10 units O $15; 30 units O $25; 10 units O $20; 30 units 20 30 40 Quantity P+t pw P and the amount imported isGivenw: (1) two nations (1 and 2) which have the sametechnology but different factor endowments and tastes, (2)two commodities (X and Y) produced under increasingcosts conditions and (3) no transportation costs, tariffs orother obstructions to trade.Prove geometrically that mutually advantageous tradebetween the two nations is possible.Note: Your answer should show the autarky (no-trade) andfree-trade points of production and consumption for eachnation, show gains from trade of each nation and expressthe equilibrium condition that should prevail when trade Stop equilibrum
- 7. Terms of trade Suppose that Spain and Sweden both produce beer and stained glass. Spain's opportunity cost of producing a pane of stained glass is 4 barrels of beer, while Sweden's opportunity cost of producing a pane of stained glass is 10 barrels of beer. By comparing the opportunity cost of producing stained glass in the two countries, you can tell that has a comparative advantage in the production of stained glass, and has a comparative advantage in the production of bef Sweden Suppose that Spain and Sweden consider trading stained glass and beer with each other. Spain can Spain specialization and trade as long as it of beer for each pane of stained glass it exports to Sweden. Slmmany, weden can gain from trade as long as it of stained glass for each barrel of beer it exports to Spain. receives more than receives more than Based on your answers to the previous question, which of the following terms of trade (that is, price of stained glass in terms of beer) would allow both…The policies are other than tariffs which restrict the volume of international trade Such policies areknown as non-tariff barriers to trade and include such practices as import quotas, orderly marketingagreements, domestic content requirements, subsidies, antidumping regulations, discriminatorygovernment procurement practices, social regulations, and sea transport and freight restrictions. It isnoted that quotas and tariffs have many of the same economic effects; however, quotas tend to bemore restrictive. Special attention is given to the revenue effect of an import quota, which may becaptured by domestic importers, foreign exporters, or the domestic government. Differentiatebetween an import subsidy and an export subsidyWhen a nation has a comparative advantage in producing a product, then in comparison with any other nation it can produce that product: O With less capital O With less labor At a lower domestic opportunity cost