Microeconomics (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134184241
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Question
Chapter 16, Problem 12RQ
(a)
To determine
Whether to agree or disagree with the given statements.
(b)
To determine
Whether to agree or disagree with the given statements.
(c)
To determine
Whether to agree or disagree with the given statements.
(d)
To determine
Whether to agree or disagree with the given statements.
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Two countries, A and B, that differ in their opportunity costs for the goods each one of them produces have decided to engage in trade. There is
A. a unique trading ratio of these two goods that will benefit both countries.
B. a unique trading ratio at which Country A will have gains from trade, but Country B will not.
C. a range of trading ratios that lies between the opportunity costs of each good for both countries at which both countries will benefit from trade.
D. a unique trading ratio at which Country B will have gains from trade, but Country A will not.
E. a range of trading ratios that provides gains from trade only to Country A.
Many trading partners trade the same goods and services with one another. The U.S. exports automobiles to Europe and Europe exports automobiles to the United States. In fact, that's true for food, appliances, computers and many other goods. Does intra-industry trade contradict the theory of comparative advantage? Why or why not?
Suppose a country is currently producing at a point on its production possibility frontier, and undertakes no trade with other countries. Then trade is opened up. Which of the following would not occur as a direct result?a) Its production possibility frontier would shift.b) Its production would shift to another point on its production possibility frontier.c) The pattern of products that the country produced would differ from the pattern that its consumers consumed.d) Consumers would be able to consume at a point outside the production possibility frontier. Please dont use any ai tool.
Chapter 16 Solutions
Microeconomics (9th Edition) (Pearson Series in Economics)
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- The diagram below shows supply and demand curves for the same good in two countries, A and B. Based on the prices and areas labeled there, Country B P Country A P P3 d P a P D D O The autarky price in Country A is P2. O Country B has a comparative advantage in this good. Moving from autarky to free trade makes suppliers in Country A worse off by the amount a+b. O Moving from autarky to free trade makes demanders in Country B better off by the amount c+d.arrow_forwardPlease use the theory of comparative advantage to explain how international trade between two countries will be beneficialarrow_forwardSuppose the United States and Mexico both produce hamburgers and tacos. The combinations of the two goods that each country can produce in one day are presented in the table below. Part 2 United States Mexico Hamburgers (in tons) Tacos (in tons) Hamburgers (in tons) Tacos (in tons) 0 270 0 150 100 180 20 100 200 90 40 50 300 0 60 0 Part 3 Which country has an absolute advantage in producing tacos? The United States Mexico . Part 4 Which country has a comparative advantage in producing tacos? The United States Mexico . Part 5 Suppose the United States is currently producing 200 tons of hamburgers and 90 tons of tacos and Mexico is currently producing 40 tons of hamburgers and 50 tons of tacos. If the United States and Mexico each specialize in producing only one good (the good for which each has a comparative advantage), then a total of enter your response here ___additional ton(s) of hamburgers…arrow_forward
- Melitz explains that under free tradearrow_forwardIf the state of Texas has a lower opportunity cost for producing beef compared to Alaska, then... Group of answer choices Texas has a comparative advantage in beef and should just produce beef for itself and not export to other states like Alaska. Texas has an absolute advantage in beef and should share expertise with Alaska so they can develop an absolute advantage as well. Texas has a comparative advantage in beef, and Alaska should purchase beef from Texas. Texas has an absolute advantage in beef, and Alaska should purchase beef from Texas.arrow_forwarde. Which country has an absolute advantage in the production of which good(s)? Which country has a comparative advantage in the production of which good(s)? f. If the countries start trading with each other, which country will specialize and export which good?arrow_forward
- A small island nation of Gondwana can produce either 40 Apple iPhones (Apple for short) or 80 Samsung Galaxy phones (Samsung for short) every hour. A small island nation of Pandea can produce 75 Apple or 100 Samsung phones every hour. Without trade, each island nation consumes everything it produces. Assume that labor is the only resource they need on each island. If they decide to trade, transportation cost is zero. After 10 hours of work right now, Gondwana produces 200 Apple and 400 Samsung phones, Pandea produces 375 Apple and 500 Samsung phones. (a) Who if any has a comparative advantage in Apple iPhones? Who if any has a comparative advantage in Samsung Galaxy phones? (b) Is it possible for both Gondwana and Pandea to improve their consumption levels in one or both products, without decreasing consumption in any of the products? If no, explain why; if yes, give an example of production schedule and trade flows that would be mutually beneficial. (c) Give a range of prices of…arrow_forwardWhy is the theory of absolute advantage incapable of explaining trade in the real world? Explain.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_forward
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