/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q2 In Country A, the production of ... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 20: Q2 (page 430)

In Country A, the production of 1 bicycle requires using resources that could otherwise be used to produce 11 lamps. In Country B, the production of 1 bicycle requires using resources that could otherwise be used to produce 15 lamps. Which country has a comparative advantage in making bicycles?

  1. Country A

  2. Country B

Short Answer

Expert verified

The correct option is a) Country A

Step by step solution

01

Step 1. Concept of comparative advantage 

The comparative advantage talks about the opportunity cost. The country has a comparative advantage when it has a lower opportunity cost for producing one good than the competing country. This can be explained using the next step.

02

Step 2. Explanation for the correct option (a) 

The opportunity cost of making bicycles for country A and country B are calculated below:

CountryA=LampsBicycles=111=11LampsCountryB=LampsBicycles=151=15Lamps

The opportunity cost of producing bicycles is less in country A. Hence, country A has a comparative advantage in producing bicycles.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Why is a quota more detrimental to an economy than a tariff that results in the same level of imports as the quota? What is the net outcome of either tariffs or quota for the world economy?

Identify and state the significance of each of the following trade-related entities: (a) the WTO; (b) the EU; (c) the Euro Zone; and (d) NAFTA.

The accompanying hypothetical production possibilities tables are for New Zealand and Spain. Each country can produce apples and plums. Plot the production possibilities data for each of the two countries separately. Referring to your graphs, answer the following:

New Zealand鈥檚 Production Possibilities Table (Millions of Bushels)


Production Alternatives

Product

A

B

C

D

Apples

0

20

40

60

Plums

15

10

5

0


Spain鈥檚 Production Possibilities Table (Millions of Bushels)


Production Alternatives

Product

R

S

T

U

Apples

0

20

40

60

Plums

60

40

20

0

  1. What is each country鈥檚 cost ratio of producing plums and apples?

  2. Which nation should specialize in which product?

  3. Show the trading possibilities lines for each nation if the actual terms of trade are 1 plum for 2 apples. (Plot these lines on your graph.)

  4. Suppose the optimum product mixes before specialization and trade were alternative B in New Zealand and alternative S in Spain. What would be the gains from specialization and trade?

Explain: 鈥淭he United States can make certain toys with greater productive efficiency than can China. Yet we import those toys from China.鈥� Relate your answer to the ideas of Adam Smith and David Ricardo.

Quantitatively, how important is international trade to the United States relative to the importance of trade to other nations? What country is the United States鈥� most important trading partner, quantitatively? With what country does the United States have the largest trade deficit?
See all solutions

Recommended explanations on Economics Textbooks

Taxation Economics

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.