Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 40, Problem 1P
To determine
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Assume that the comparative-cost ratios of two products— baby formula and tuna fish—are as follows in the nations of Canswicki and Tunata: Canswicki: 1 can baby formula ≡ 2 cans tuna fish Tunata: 1 can baby formula ≡ 4 cans tuna fishIn what product should each nation specialize? Which of the following terms of trade would be acceptable to both nations: (a) 1 can baby formula ≡ 2 1 2 cans tuna fish; (b) 1 can baby formula ≡ 1 can tuna fish; (c) 1 can baby formula ≡ 5 cans tuna fish?
Assume that the comparative-cost ratios of two products-baby formula and tuna fish-are as follows in the nations of Canswicki and
Tunata:
Canswicki: 1 can baby formula = 5 cans tuna fish
Tunata: 1 can baby formula = 7 cans tuna fish
a. In what product should each nation specialize?
Canswicki should produce baby formula
and Tunata should produce tuna fish
b. Would the following terms of trade be acceptable to both nations?
i. 1 can baby formula = 4 cans tuna fish: (Click to select) v
iI. 1 can baby formula = 8 cans tuna fish: (Click to select) v
es
iII. 1 can baby formula = 5.5 cans tuna fish: (Click to select)
Assume that the comparative-cost ratios of two products-baby formula and tuna fish-are as follows in the nations of Canswicki and
Tunata:
Canswicki: 1 can baby formula = 2 cans tuna fish
Tunata: 1 can baby formula
= 4 cans tuna fish
a. In what product should each nation specialize?
Canswicki should produce (Click to select) ♥
and Tunata should produce | (Click to select) ♥
b. Would the following terms of trade be acceptable to both nations?
i. 1 can baby formula = 2.5 cans tuna fish: (Click to select)
ii. 1 can baby formula = 1 can tuna fish: (Click to select) v
iii. 1 can baby formula = 5 cans tuna fish: | (Click to select) v
Chapter 40 Solutions
Economics (Irwin Economics)
Ch. 40.2 - Prob. 1QQCh. 40.2 - Prob. 2QQCh. 40.2 - Prob. 3QQCh. 40.2 - Prob. 4QQCh. 40 - Prob. 1DQCh. 40 - Prob. 2DQCh. 40 - Prob. 3DQCh. 40 - Prob. 4DQCh. 40 - Prob. 5DQCh. 40 - Prob. 6DQ
Ch. 40 - Prob. 7DQCh. 40 - Prob. 8DQCh. 40 - Prob. 9DQCh. 40 - Prob. 10DQCh. 40 - Prob. 11DQCh. 40 - Prob. 12DQCh. 40 - Prob. 13DQCh. 40 - Prob. 14DQCh. 40 - Prob. 1RQCh. 40 - Prob. 2RQCh. 40 - Prob. 3RQCh. 40 - Prob. 4RQCh. 40 - Prob. 5RQCh. 40 - Prob. 6RQCh. 40 - Prob. 7RQCh. 40 - Prob. 8RQCh. 40 - Prob. 9RQCh. 40 - Prob. 10RQCh. 40 - Prob. 11RQCh. 40 - Prob. 12RQCh. 40 - Prob. 13RQCh. 40 - Prob. 1PCh. 40 - Prob. 2PCh. 40 - Prob. 3PCh. 40 - Prob. 4P
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- Assume that the comparative-cost ratios of two products-baby formula and tuna fish-are as follows in the nations of Canswicki and Tunata: Canswicki: 1 can baby formula = 4 cans tuna fish Tunata: 1 can baby formula = 6 cans tuna fish a. In what product should each nation specialize? Canswicki should produce (Click to select) V, and Tunata should produce (Click to select) V b. Would the following terms of trade be acceptable to both nations? i. 1 can baby formula = 3 cans tuna fish: (Click to select) V ii. 1 can baby formula = 7 cans tuna fish: (Click to select) V iii. 1 can baby formula = 4.5 cans tuna fish: (Click to select) ♥arrow_forwardAssume that the comparative-cost ratios of two products-baby formula and tuna fish-are as follows in the nations of Canswicki and Tunata: Canswicki: 1 can baby formula = 3 cans tuna fish Tunata: 1 can baby formula = 5 cans tuna fish a. In what product should each nation specialize? Canswicki should produce [(Click to select), and Tunata should produce [(Click to select) ♥ b. Would the following terms of trade be acceptable to both nations? i. 1 can baby formula = 2 cans tuna fish: (Click to select) ii. 1 can baby formula = 3.5 cans tuna fish: (Click to select) iii. 1 can baby formula = 6 cans tuna fish: (Click to select)arrow_forwardConsider a two country, two goods, one factor (labor) model of international trade. Suppose home country require 1 units of labor to produce a unit of cloth and 1 unit of labor to produce a unit of wine (regardless of output levels). Foreign country requires 2 unit of labor to produce 1 unit of cloth and 1.5 units of labor to produce 1 unit of wine (regardless of output levels). (a) Which country has the comparative advantage in producing wine? Justify your answer. (b) Which country has the absolute advantage in producing wine? (c) Which country will have higher autarky price of wine in terms of cloth?arrow_forward
- Consider a two country, two goods, one factor (labor) model of international trade. Suppose home country require 1 units of labor to produce a unit of cloth and 1 unit of labor to produce a unit of wine (regardless of output levels). Foreign country requires 2 unit of labor to produce 1 unit of cloth and 1.5 units of labor to produce 1 unit of wine (regardless of output levels). (a) Which country has the comparative advantage in producing wine? Justify your answer. (b) Which country has the absolute advantage in producing wine? (c) Which country will have higher autarky price of wine in terms of cloth? (d) Suppose after trade, the international relative price settles at a level strictly between the autarky relative prices of the two countries. At the trade equilibrium, show which country will produce wine and which country will produce cloth.arrow_forwardAssume that the comparative-cost ratios of two products—baby formula and tuna fish—are as follows in the nations of Canswicki and Tunata: Canswicki: 1 can baby formula ≡ 5 cans tuna fish Tunata: 1 can baby formula ≡ 7 cans tuna fish a. In what product should each nation specialize? Canswicki should produce _____- , and Tunata should produce _____ b. Would the following terms of trade be acceptable to both nations? i. 1 can baby formula ≡ 4 cans tuna fish: yes or no ii. 1 can baby formula ≡ 8 cans tuna fish: yes or no iii. 1 can baby formula ≡ 5.5 cans tuna fish: yes or noarrow_forwardSuppose there are two countries Peru and Japan that produce Food and Fuel. Peru can produce 7,523 units of Food or 17,853 units of Fuel using a labour force of 8000. Japan can produce 5,733 units of Food or 24,156 units of Fuel using a labour force of 5000. (g) If the terms of trade is 2 to 1 in favour of the country with the comparative advantage in food. Determine the combination of the two goods that each country will consume after trade if the country with the comparative advantage in fuel imports 4000 units of food. Label this point B and B* respectively. h) Who gains from trade? Who loses? What is the impact if any on the world? (i) What should the terms of trade be to make trade beneficial for BOTH Japan and Peru? Explain.arrow_forward
- Which of the following best explains the concept of "Comparative Advantage" in international trade? a) A country should produce goods in which it has an absolute advantage and trade for those where it does not. b) A country should only export goods and import nothing to maintain a positive trade balance. c) A country should specialize in the production of goods for which it has the lowest opportunity cost compared to other countries. d) A country should diversify its production across various sectors to avoid dependence on a single export commodity.arrow_forwardSuppose that a country has a demand function for a laptop given by P = 30 – Qa and supply 1 function given by P = where P is the market price of laptop and Qd and Q, are quantity of laptop demanded and supplied in a country, respectively. 18. If this country engages in international trade and that world price of laptop is Pw = 14, will this country export or import a laptop after international trade? How many units?arrow_forwardSuppose that there are 10,000 hours of labor available in Canada, and that 15 hours of labor are required to produce one unit of cotton, while 5 hours are required to produce one unit of butter. When trade occurs, the world relative price of cotton (in terms of butter) is 2, and Canada exports 800 units of butter. Find out Canada's imports of cotton would be units. Note: If your answer is an integer, please put in an integer. If your answer is a fraction, please simplify it or convert it to a decimal.arrow_forward
- True or False: If Country B has an absolute advantage over Country A in producing bicycles, it will also have a comparative advantage over Country A in producing bicyclesarrow_forwardDraw a domestic supply and demand diagram for a product in which the United States does not have a comparative advantage. What impact do foreign imports have on domestic price and quantity? On your diagram show a protective tariff that eliminates approximately one-half of the assumed imports. What are the price-quantity effects of this tariff on ( a) domestic consumers, (b) domestic producers, and (c) foreign exporters? How would the effects of a quota that creates the same amount of imports differ?arrow_forwardCandonia has a comparative advantage in the production of , while Desonia has a comparative advantage in the production of . Suppose that Candonia and Desonia specialize in the production of the goods in which each has a comparative advantage. After specialization, the two countries can produce a total ofarrow_forward
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