Chapter 20: Q3. (page 430)
True or False. If Country B has an absolute advantage over Country A in producing bicycles, it will also have a comparative advantage over Country A in producing bicycles.
Short Answer
The statement is False.
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Chapter 20: Q3. (page 430)
True or False. If Country B has an absolute advantage over Country A in producing bicycles, it will also have a comparative advantage over Country A in producing bicycles.
The statement is False.
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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?
Country A
Country B
Assume that the comparative-cost ratios of two products—baby formula and tuna fish—are as follows in the nations of Canswicki and Tunata:
Canswicki: 1 can baby formula ≡ 2 cans tuna fish
Tunata: 1 can baby formula ≡ 4 cans tuna fish
In what product should each nation specialize? Which of the following terms of trade would be acceptable to both nations: (a) 1 can baby formula ≡ 2 1/2 cans tuna fish; (b) 1 can baby formula ≡ 1 can tuna fish; (c) 1 can baby formula ≡ 5 cans tuna fish?
Suppose that the opportunity-cost ratio for sugar and almonds is 4S ≡ 1A in Hawaii but 1S ≡ 2A in California. Which state has the comparative advantage in producing almonds?
Hawaii
California
Neither
In 2018, manufacturing workers in the United States earned average compensation of \(21.86 per hour. That same year, manufacturing workers in Mexico earned average compensation of \)3.20 per hour. How can U.S. manufacturers possibly compete? Why isn’t all manufacturing done in Mexico and other low-wage countries?
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.
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