PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 16, Problem 16.2CC
To determine
Describe the transactions of Costa Ricans in an open trade.
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In a PPC graph, if free trade makes the budget line become flatter and the comparative advantage good is on the y - axis, what has free trade done to the country's terms of trade?
Suppose that the United States limits the amount of steel that can be imported from other countries. Using a PPF that puts units of steel on the horizontal axis and units of another good, such as food, on the vertical axis, explain how such a steel import quota will affect production of food and steel in the United States and alter our consumption possibilities. Will the quota make the United States better off as a whole? If not, will it make anyone in the United States better off? Explain.
For 19.21, think of the PPF as that of steel produced in the United States and food produced in the United States (and not as total steel available for use in the United States)
The following graph shows the same PPF for Lamponia as before, as well as its initial consumption at point A.
As you did for Maldonia, place a black point (plus symbol) on the following graph to indicate Lamponia's consumption after trade.
Lamponia
64
Consumption After Trade
1
1
0
8
16
24
32
40
48
56
64
GRAIN (Millions of pounds)
True or False: Without engaging in international trade, Maldonia and Lamponia would not have been able to consume at the after-trade consumption
bundles. (Hint: Base this question on the answers you previously entered on this page.)
True
56
8
48
40
TEA (Millions of pounds)
K
16
8
0
PPF
False
Chapter 16 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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- In Germany it takes three workers to make one television and four workers to make one video camera. In Poland It takes six workers to make one television and 12 workers to make one video camera. Who has the absolute advantage in the production of televisions? Who has the absolute advantage in the production of video cameras? How can you tell? Calculate the opportunity cost of producing one additional television set in Germany and In Poland. (Your calculation may involve fractions, which Is tine.) Which country has a comparative advantage in the production of televisions? Calculate the opportunity cost of producing one video camera in Germany and in Poland. Which country has a comparative advantage in the production of video cameras? In this example, is absolute advantage the same as comparative advantage, or not? In what product should Germany specialize? In what product should Poland specialize?arrow_forwardThe following graph shows the same PPF for Candonia as before, as well as its initial consumption at point A. Place a black point (plus symbol) on the graph to indicate Candonia's consumption after trade. Note: Dashed drop lines will automatically extend to both axes. SUGAR (Millions of pounds) 64 56 48 PPF 40 2 + 16 8 0 0 8 16 Candonia 24 32 40 GRAIN (Millions of pounds) 48 56 64 + Consumption After Trade The following graph shows the same PPF for Lamponia as before, as well as its initial consumption at point A.arrow_forwardIn Country T, it takes 10 resources to produce 1 ton of cocoa and 13.5 resources to produce 1 ton of rice. In Country Y, it takes 40 resources to produce 1 ton of cocoa and 20 resources to produce 1 ton of rice. Country T has a comparative advantage over Country Y in cocoa. This follows the theory of comparative advantage, and we can say that engaging in free trade benefits all countries that participate in it; however, this conclusion stems from which of these inaccurate assumptions? Multiple Choice We have assumed constant returns to scale. We have assumed the prices of resources and exchange rates in the two countries are dynamic. We have assumed there are barriers to the movement of resources from the production of one good to another within the same country. We have assumed that agrarian nations do not specialize in producing particular products. We have assumed diminishing returns to specialization.arrow_forward
- In Japan, one worker can make 5 tons of rubber or 80 radios. In Malaysia, one worker can make 10 tons of rubber or 40 radios. Who has the absolute advantage in the production of rubber or radios? How can you tell? Calculate the opportunity cost of producing 80 additional radios in Japan and in Malaysia. (Your calculation may involve fractions, which is fine.) Which country has a comparative advantage in the production of radios? Calculate the opportunity cost of producing 10 additional tons of rubber in Japan and in Malaysia. Which country has a comparative advantage in producing rubber? In this example, does each country have an absolute advantage and a comparative advantage in the same good? e. In what product should Japan specialize? In what product should Malaysia specialize?arrow_forwardQ4: The figure below represents the production possibilities frontiers (PPF) for Countries A and B. Country A Country B Jackets 420 360 300 240 180 120 60 0 10 20 30 40 50 60 70 80 90 100 Jackets 420 360 300 240 180 120 60 Snowboards 0 10 20 30 40 50 60 70 80 90 100 Considering the production possibilities frontiers of both countries, we can infer that snowboard production. Both countries would be willing to agree to the following terms of trade: a. Country A; 5 jackets for each snowboard b. Country A; 3 jackets for each snowboard c. Country B; 5 jackets for each snowboard d. Country B; 3 jackets for each snowboard ermitte class use only) should specialize inarrow_forwardWhen a country has a comparative advantage in the production of a good, it means that it can produce this good at a lower opportunity cost than its trading partner. Then the country will specialize in the production of this good and trade it for other goods. The following graphs show the production possibilities frontiers (PPFS) for Candonia and Sylvania. Both countries produce grain and tea, each initially (i.e., before specialization and trade) producing 12 million pounds of grain and 6 million pounds of tea, as indicated by the grey stars marked with the letter A. TEA (Millions of pounds) grain. 32 28 24 20 16 12 PPF 4 Candonia A 8 12 16 20 24 GRAIN (Millions of pounds) 28 32 ? TEA (Millions of pounds) 32 28 24 20 16 12 B 0 0 PPF Sylvania 8 12 16 20 24 GRAIN (Millions of pounds) 28 32 ? Candonia has a comparative advantage in the production of , while Sylvania has a comparative advantage in the production of ▼. Suppose that Candonia and Sylvania specialize in the production of the…arrow_forward
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