6. Trading under increasing opportunity costsThe following graph shows the production possibilities frontier for the imaginary country of Contente under conditions of increasing costs. In theabsence of trade, the relative cost of rice in Contente in terms of tablets (or the marginal rate of transformation (MRT) of rice into tablets) isshown by the slope of line fi, tangent to the production possibilities frontier at point A.300270Consumption After Trade2402101801501209060302.101214161820TABLETSWhich of the following most accurately describes Contente's economy in the absence of trade?RICE (Bushels) Which of the following most accurately describes Contente's economy in the absence of trade?Contente produces and consumes 6 tablets and 234 bushels of rice.Contente produces 6 tablets and 234 bushels of rice.O Contente produces and consumes 6 tablets and 180 bushels of rice.Contente produces 234 bushels of rice but consumes only 180 bushels of rice.O Contente consumes 6 tablets and 234 bushels of rice.At point A, the slope of line ti reveals that Contente must foregobushels of rice in order to produce 1 tablet. (Hint: Select a line to see itsslope.)Suppose that Contente recognizes that it has a comparative advantage in the production of tablets. Contente decides to specialize in making tabletsand enters international trade. The international terms of trade (the price of rice in terms of tablets) are shown by the slope of the line t2, tangent tothe production possibilities frontier at point B.The slope of 12 reveals that now Contente foregoes|bushels of rice in order to produce 1 tablet. This means that the absolute value of theproduction possibilities frontier's slopeAssume that Contente chooses to consume the same number of tablets as it did in the absence of trade.On the previous graph, use the purple point (diamond symbol) to indicate Contente's consumption after trade.According to the graph, Contente's production gain from specialization isand its consumption gain from trade is

Meaning of Opportunity Cost: The term opportunity cost refers to the situation under which the…

6. Trading under increasing opportunity costs The following graph shows the production possibilities frontier for the imaginary country of Contente under conditions of increasing costs. In the absence of trade, the relative cost of rice in Contente in terms of tablets (or the marginal rate of transformation (MRT) of rice into tablets) is shown by the slope of line t, tangent to the production possibilities frontier at point A. 300 270 Consumption After Tradeo 240 210 180 150 120 90 60 30 10 12 TABLETS 14 16 18 20 Which of the following most accurately describes Contente's economy in the absence of trade? RICE (Bushels)

6. Trading under increasing opportunity costs The following graph shows the production possibilities frontier for the imaginary country of Contente under conditions of increasing costs. In the absence of trade, the relative cost of rice in Contente in terms of tablets (or the marginal rate of transformation (MRT) of rice into tablets) is shown by the slope of line t, tangent to the production possibilities frontier at point A. 300 270 Consumption After Tradeo 240 210 180 150 120 90 60 30 10 12 TABLETS 14 16 18 20 Which of the following most accurately describes Contente's economy in the absence of trade? RICE (Bushels)

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter3: Interdependence And The Gains From Trade

Section: Chapter Questions

Problem 8PA

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Table 33.15 shows how the average costs of production for semiconductors (the chips In computer memories) change as the quantity of semiconductors built at that factory increases. Based on these data, sketch a curve with quantity produced on the horizontal axis and average cost of production on the vertical axis. How does the curve illustrate economies of scale? If the equilibrium quantity of semiconductors demanded is 90,000, can this economy take full advantage of economies of scale? What about if quantity demanded is 70,000 semiconductors? 50,000 semiconductors? 30,000 semiconductors? Explain how international trade could make it possible for even a small economy to take full advantage of economies of scale, while also benefiting from competition and the variety offered by several producers.
True or False: The source of comparative advantage must be natural elements like climate and mineral deposits. Explain.
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? In what product should Japan specialize? In what product should Malaysia specialize?
Does intra-industry trade contradict the theory of comparative advantage?
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ee-trade benefits Ttion to the positive welfare effects that free trade has on an economy, there are a variety of other benefits of international trade ng scenario: Thout free trade, Sapphira has market power as a local producer. Once free trade is implemented in the local economy, Sapphira ger able to raise its prices above competitive levels. vious scer represents which of the following benefits of free trade? D An enhanced flow of ideas Increased variety of goods Increased competition Lower costs through economies of scale Grade It Now Sav
Two countries, Korea and Vietnam, are engaging in international trade.They produce two goods: automobiles and cloth. We observe a relativeabundance of cheap labor in Vietnam and a relative abundance of capitalin South Korea. a. Assume that automobiles are capital-intensive and cloth are cheaplabor-intensive. Using the Hecksher-Ohlin theory, explain what willhappen in trade between these two countries, in terms of export andimport. c. Draw a graph that shows the above situation in South Korean economy with a P P F and two relative prices (one before trade and theother after trade). The quantity of automobiles (QAuto) is on thehorizontal axis and the quantity of cloth (QCloth) is on the verticalaxis.
7. What is the law of comparative advantage? According to the law of comparative advantage, what should be the distin- guishing characteristics of the goods a nation produces? What should be the distinguishing characteristics of the goods a na- tion imports? How will international trade influence people's production levels and living standards? Explain. 15
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3. Absolute and comparative advantage Consider two neighboring island countries, Charisma and Fiatstan. Each has 72,000 labor hours available per week that it can use to produce corn, jeans, or a combination of both. The following table shows the amount of labor hours required to produce 1 bushel of corn or 1 pair of jeans. Corn Jeans Country (Labor hours per bushel) (Labor hours per pair) Charisma 80 16 Fiatstan 24 12 has an absolute advantage in the production of corn, and has an absolute advantage in the production of jeans. Initially, suppose Charisma uses 54,000 hours of labor per week to produce corn and 18,000 hours per week to produce jeans, while Fiatstan uses 18,000 hours of labor per week to produce corn and 54,000 hours per week to produce jeans. Assume there are no other countries willing to trade goods, so in the absence of trade between these two countries, each country consumes the amount of com and jeans it produces. Charisma's opportunity cost of producing 1 bushel of…