Assume that two countries Canada and China produce just two goods- particle board,plywood sheets- in their economies. Also assume that there is no currency in the systemand countries, if willing to trade, just exchange the two goods. The only input being usedin the production of the goods is the Labour. Canada can produce 10 particle boards or25 plywood sheets in 100 hours. China can produce 20 particle boards or 50 plywoodsheets in 100 hours.a. Does any country have absolute advantage in the production of the goods?b. Does any country have the comparative advantage in producing the particle boards?c. Does there exist a feasible exchange rate between particle board and plywood sheet(tonnes particle board / tonnes plywood sheet)? If yes, show that if countriesspecialize and trade at this exchange rate, they can both raise their consumptionlevel.

Absolute advantage and comparative advantages are the two widely used terms in Internation Trade.…

Answered: a. Does any country have absolute…

a. Does any country have absolute advantage in the production of the goods? b. Does any country have the comparative advantage in producing the particle boards?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter33: International Trade

Section: Chapter Questions

Problem 4SCQ: In Germany it takes three workers to make one television and four workers to make one video camera....

See similar textbooks

Related questions

Q: why can a monopoly earn economic profits in the long run?

A: A circumstance where the seller can make more than usual earnings is known as a supernormal profit.…

Q: b. An exogenous increase in the price of oil. Price Level (Y) 10 9 8 7 6 5 4 3 2 1 0 0 1 2 3 LRAS E…

A: The total quantity of all goods (and services) that the economy demands at various price levels is…

Q: 8. The invisible hand is A. B. C. D. Perfect competition. The profit motive. Government direction.…

A: Invisible hand Adam Smith, a British moral philosopher, used the metaphor of the "invisible hand" to…

Q: . A merchant loaned P20,000.00 to a friend to start a business, the loan was originally made at 8%…

A: The answer for the above questions are: Explanation: Answer to question 1 P65,077.04

Q: Assume the Canadian economy is currently in recession and the government budget is in deficit. (a)…

A: Disclaimer- “Since you have asked multiple question, we will solve the first three question for you…

Q: 29. If full-employment real GDP in this economy is $3,500 billion, how much of an increase in…

A: The multiplier effect refers to any adjustments in consumer spending that occur after any real GDP…

Q: Loan servicing includes a number of responsibilities such as collecting monthly mortgage payments…

A: Loan Servicing is defined as the administrative services and costs that the lender incurs from the…

Q: Suppose the market for gourmet chocolate is in long-run equilibrium, and an economic downturn has…

A: The demand is an economic idea that connects with a customer's longing to buy labor and products and…

Q: 2. You are deciding whether or not to purchase insurance. Your income is $100,000 and the chance of…

A: Income = $100,000 Chance of getting sick = 30% Coinsurance rate = 0.15 U = Y0.5 When sick,…

Q: Consider a monopolist's demand curve: and a total cost curve of: q= 2400 - 2p TC = 800+600q (a)…

A: Demand curve is the graphical representation of demand schedule. Equilibrium is where demand equals…

Q: 1. In 2022 the Finnish GDP is estimated to grow by 1,7 %. If it was 253 billion euros in 2021, how…

A: Since you have posted multiple questions, and all three belong to a different subject, so as per the…

Q: What should be the value of a so that Player 1 will have a dominant strategy? PLAYER 2 C D (2,4)…

A: Strategic dominance can be understand as any player will choose the best/better strategy…

Q: Which of the following is true? a. When the average cost is decreasing, the total cost must also be…

A: Which of the following is true?

Q: It is the week before the Yule Ball Dance, and Victor and Ron are each contemplating whether to ask…

A: Nash equilibrium refers to the equilibrium of the game where there is no incentive for the players…

Q: Early in 2011, the world price of copper reached a record high of over $10,000 per ton. Two events…

A: Economic growth can be described as the increment or improvement in the inflation-adjusted market…

Q: The term “moral hazard” describes increases in risky behavior resulting from efforts to make that…

A: The phrase "moral hazard" in economics describes the circumstance that arises when a person has the…

Q: When price of X double and the price of Y also double, the slope of the budget line doubled. the…

A: Budget line shows the relationship between the income of consumers and no. of goods that can be…

Q: Suppose Bethilda earned $30,000 at her last job where she faced a 3% chance of dying on the job. Now…

A: Value of Statistical Life is defined as a trade-off between the fatality risk and the money earned.…

Q: The following figures are from data on Good Island Economy Items $m Net private investment…

A: Gross private investment is a metric used to describe how much money corporations spend…

Q: 32. a. b. 31. What is the maximum change in equilibrium real GDP that could occur as result of a…

A: The most prevalent automatic stabilisers are progressive tax systems and transfer payments. These…

Q: See Hint Rhea's inverse demand for a good is given by p= 13.00 (1.50x q). Assuming that there are…

A: Demand for goods is given as P = 13 - 1.5q Supplier meet her demand at p = 2 TO p = 8

Q: If the price of croissants increased, the demand curve for bread would shift to the the equilibrium…

A: Rightward shift in demand curve = increase in demand Substitute goods are the goods which can be…

Q: A cash flow has an initial amount of PHP 100,000 at EOY 1 and decreases by 10,000 per year starting…

A: A future sum of money's present worth is its value now.The annual worth is the sum of all benefits…

Q: Continue your analysis of the video poker market in Chambana: demand by patrons for the games (in…

A: Here we are given the market for video poker. In this market there is a supply and the demand curves…

Q: Suppose production and prices of food and clothing (the only two…

A: Nominal GDP is the monetary value of final goods and services produced within a geographical…

Q: You have decided that upon retirement you will buy a mansion in Hawaii with cold cash after 18…

A: present value is the value of investment in today's dollar Future value is the value of investment…

Q: Suppose the market for cereal is monopolis competitive and in long-run equilibrium. TH demand (and…

A: Monopolistically competitive market is characterized by the presence of the many buyers and sellers.…

Q: 8.5 8 75 7 65- 6 5.5 5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 Price 200 500 650 O subsidy of $2 per unit tax of…

A: Here, the given graph represents the market with negative externality due to difference in the…

Q: Person 1: MB1= 40 − 2Q Person 2: MB2= 30 − 2Q Person 3: MB3= 31 − Q They are non-rival, just like…

A: Here we are given the individual benefits of the public good and the marginal cost of the public…

Q: In the equation below, how did the professor get 14? Profits=P*Q-(3-5Q) Where P is 7.5 and Q is…

A: profits are measured as the difference between total revenue and total cost . Where Cost includes…

Q: 21.The cost curves for an individual firm are given in the figure. In Figure (A), highlight the…

A: Here, given two graphs shows the marginal cost, average total cost and average variable cost curves.

Q: "In this 3 authors Baron, Drucker and Mitchell" please explain there ideas.

A: According to Baron, "Opportunities to produce something new that has the potential to yield economic…

Q: Which of the following are reasons the aggregate demand curve is downward sloping? Check all that…

A: Aggregate demand curve shows the inverse relationship between price level and quantity demanded.…

Q: Assume that the production function for a certain production process is given by the following…

A: Marginal product is the increase in output produced by employing one more unit of the input.

Q: 5.16 Consider the following investment project. n 0 1 2 3 4 5 Ann - $42,000 32,400 33,400 32,500…

A: Given Cash flow: c Pi 0 -42000 1 32400 2 33400 3 32500 4 32500 5 33000 The…

Q: Suppose the government of the island has decided to make tomatoes more affordable to consumers by…

A: Disclaimer: - Since you asked multipart question, we are solving 1st 3 parts as per guidelines. If…

Q: Suppose the aggregate matching function is H (U,V) = A√UV and labor market tightness is one. The job…

A: A rate that tells the users about the number of people looking for jobs in the market suitable for…

Q: To address the immediate impact of the coronavirus crisis, Mr Biden has vowed to spend "whatever it…

A: Positive economics is fact-related and normative economics is opinion-related. The concept of the…

Q: a. Draw a graph showing demand and supply in a perfectly competitive market with a perfectly elastic…

A: At the point when supply and demand intersect, or the intersection of the two, market equilibrium is…

Q: Question 1 Jennifer is a single mom with a weekly budget of $100. She can spend her weekly income on…

A: Utility function : U(f , d ) = f0.9d0.1 Price of food = 1 Price of diaper = 0.5 Weekly Budget =…

Q: What are the three functions of money in an economy? How does Bitcoin measure up to each standard?

A: Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: e dle Top Middle Bottom Left Column (-5, -1) (1,-3) (0, 10) Center (2, 2) (1,2) (0,0) Right (3, 3)…

A: The concept is based on game theory. The dominant strategy of row player means that the strategy…

Q: Consumer surplus in a market for a product would be equal to the area under the demand curve if A)…

A: Consumer surplus refers to difference between willingness to pay and actual payment. Consumer…

Q: What are the pros and cons of cash incentive programs from a public health perspective? List at…

A: Cash Incentive Programs are defined as programs that are paid out of the workers paychecks, either…

Q: A firm’s marginal revenue function is ?? = −9? + 126. Use indefinite integrals to solve for the…

A: The additional total revenue produced by increasing product sales by 1 unit is known as marginal…

Q: Good A Good B 2015 Price $30 $100 2015 Quantity 900 192 2016 Price $31 $201 a) Compute nominal GDP…

Q: Some people argue for protectionism by pointing out that other countries with whom we trade engage…

A: Protectionist measures by countries could be in form of tariff and non tariff barriers. One such, as…

Q: Veronika's utility function for regular-flavored toothpaste (R) and mint-flavored toothpaste (M) is…

A: The consumer achieves utility or satisfaction by consuming two goods. Both goods and satisfaction…

Q: Company X sells Christmas Lights for 450 pesos. The variable cost is 200 pesos per unit while the…

A: Formula is,Quantity of units required to achieve the goal = [Fixed cost + Profit] / [Price -…

Q: Next, for the first part, you must compare and contrast the rights—and the regulation of those…

A: Differentiate the governance of rights for unionized and public sector employees: The main…

Concept explainers

Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

Question

Assume that two countries Canada and China produce just two goods- particle board,
plywood sheets- in their economies. Also assume that there is no currency in the system
and countries, if willing to trade, just exchange the two goods. The only input being used
in the production of the goods is the Labour. Canada can produce 10 particle boards or
25 plywood sheets in 100 hours. China can produce 20 particle boards or 50 plywood
sheets in 100 hours.
a. Does any country have absolute advantage in the production of the goods?
b. Does any country have the comparative advantage in producing the particle boards?
c. Does there exist a feasible exchange rate between particle board and plywood sheet
(tonnes particle board / tonnes plywood sheet)? If yes, show that if countries
specialize and trade at this exchange rate, they can both raise their consumption
level.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Introduction

VIEW

Question a: Absolute advantage

VIEW

Question b: Comparative advantage in Particle Board

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

If trade increases world GDP by 1 per year, what is the global impact of this increase over 10 years? How does this increase compare to the annual GDP of a country like Sri Lanka? Discuss. Hint To answer this question, here are steps you may want to consider. Go to the World Development Indicators (online) published by the World Bank. Find the current level of World GDP in constant international dollars. Also, find the GDP of Sri Lanka in constant international dollars. Once you have these two numbers, compute the amount the additional increase in global incomes due to trade and compare that number to Sri Lankas GDP.
Brazil can produce 100 pounds of beef or 10 autos. In contrast the United States can produce 40 pounds of beef or 30 autos. Which country has the absolute advantage in beef? Which country has the absolute advantage in producing autos? What is the opportunity cost of producing one pound of beef In Brazil? What is the opportunity cost of producing one pound of beef in the United States?
Occasionally, a government official will argue that a country should strive for both a trade surplus and a healthy inflow of capital from abroad. Is this possible?
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?
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?