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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Question
Chapter 40, Problem 8RQ
To determine
The benefits of an international trade.
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Students have asked these similar questions
Which of the following statements about foreign trade is
correct? Choose an answer:
O 1. A good is imported if the world market price for this good is higher than the domestic
opportunity costs of producing this good.
O 2. A good is exported if the world market price for this good is lower than the domestic
opportunity costs of producing this good.
3. The levying of a domestic duty rate on an imported good increases the
producer surplus and reduces the domestic consumer surplus.
O 4. If a country has an absolute advantage in one good, it also has a comparative advantage
in that good.
O 5. A particularly productive country can have a comparative advantage in all goods.
Suppose that two countries can produce wheat or cotton. If country A produces only wheat it can produce 38 units of wheat, and if it only produces cotton
it can produce 45 units of cotton. If country B produces only wheat it can produce 27 units of wheat, and if it only produces cotton it can produce 35 units
of cotton. Given the production possibilities frontiers above which of the following would be feasible terms of trade between country A and country B?
O a. One unit of cotton for 0.92 units of wheat.
O b. One unit of cotton for 0.72 units of wheat.
O c. One unit of wheat for 1.08 units of cotton.
O d. One unit of wheat for 1.35 units of cotton.
O e. None of the other answers are feasible terms of trade.
5. Free-trade benefits
In addition to the positive welfare effects that free trade has on an economy, there are a variety of other benefits of international trade. Consider the
following scenario:
Because of international trade, poorer countries are able to learn about technological advances made by other countries rather than
investing scarce resources in developing advanced technology themselves.
The previous scenario represents which of the following benefits of free trade?
O Increased variety of goods
O Increased competition
O Lower costs through economies-of scale
O An enhanced flow of ideas
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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- 25 20 15 10 LO 0 P a 0 O 3 (d) areas (b) + (c) + (d) + (e) (e) areas (a) + (b) + (c) + (d) e 6 b O S 9 12 15 18 25. If the free trade price is IP and this country imposes a trade tariff of $6, the loss to the economy as a result of this tariff is represented by O(a) area (a) in this graph (b) area (b) in this graph (c) areas (c) + (d) P* 21 IP D 24 Qarrow_forward5. The price of trade Suppose that Portugal and Germany both produce beer and wine. Portugal's opportunity cost of producing a bottle of wine is 3 barrels of beer while Germany's opportunity cost of producing a bottle of wine is 11 barrels of beer. By comparing the opportunity cost of producing wine in the two countries, you can tell that Portugal v has a comparative advantage in the production of wine and Germany v has a comparative advantage in the production of beer. Suppose that Portugal and Germany consider trading wine and beer with each other. Portugal can gain from specialization and trade as long as it receives more than 3 barrels v of beer for each bottle of wine it exports to Germany. Similarly, Germany can gain from trade as long as it receives more than 1/11 bottle v of wine for each barrel of beer it exports to Portugal. Based on your answer to the last question, which of the following prices of trade (that is, price of wine in terms of beer) would allow both Germany and…arrow_forwardChina Steel Toys United States Steel Toys A 8 0 A 16 0 6 10 B 12 12 C UI 4 20 C 8 24 D 2 30 D 4 36 E O 40 E 0 48 1. Which country has absolute advantage in the production of steel? 2. Which country has absolute advantage in the production of toys? 3. Which country has comparative advantage in the production of toys? 4. Which country has comparative advantage in the production of steel? 5. If the two countries specialize and trade with each other, which country will import steel?arrow_forward
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