Microeconomics (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134184241
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Chapter 16, Problem 10RQ
To determine
Trade and consumers welfare.
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How can trade affect a third party positively?
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)?
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Chapter 16 Solutions
Microeconomics (9th Edition) (Pearson Series in Economics)
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- When can two countries gain from trading two goods? when the first country can only produce the first good and the second country can only produce the second good when the first country can produce both goods, but can only produce the second good at great cost, and the second country can produce both goods, but can only produce the first good at great cost when the first country is better at producing both goods and the second country is worse at producing both goods Two countries could gain from trading two goods under all of the above conditions.arrow_forwardIn what ways has free trade helped the economy? In what ways has free trade hurt the economy?arrow_forwardWhere does economic equivalence exist?arrow_forward
- Which country has a comparative advantage in the production of wine?arrow_forwardwhy isn't trade among countries like a game with some winners and some losersarrow_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_forward
- Trade makes both consumers and producers better off. Explain this in detail with all appropriate graphs.arrow_forwardThe 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= 2 Corn? Why or why not?arrow_forwardGhana's president is also very interested in banning the imports of food in order to increase nutrition in her country. What is the logic behind this? Will it work?arrow_forward
- Why is comparative advantage more important than absolute advantage in determining whether trade is beneficial?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_forwardHow does free trade influence the comparative advantage between countries?arrow_forward
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