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Chapter 20: Q. 18 (page 494)

Why does the United States not have an absolute advantage in coffee?

Short Answer

Expert verified

The United States does not have an absolute advantage in coffee because the climatic condition is unfavorable for the production of coffee.

Step by step solution

01

Step 1. Meaning of Absolute Advantage.

A country has an absolute advantage in those products in which it has a productivity edge over other countries.

02

Step 2. The United States does not have an absolute advantage in coffee.

The United States does not have an absolute advantage in coffee because the climatic condition is unfavorable for the production of coffee. A coffee tree cannot tolerate very high or low temperatures.

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Most popular questions from this chapter

How does comparative advantage lead to gains from trade?

Table 20.15 shows how the average costs of production for semiconductors (the 鈥渃hips鈥� in computer memories) change as the quantity of semiconductors built at that factory increases.

a. 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?

b. 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?

c. 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.

Under what conditions does comparative advantage lead to gains from trade?

Do consumers benefit from intra-industry trade?

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 of the additional increase in global incomes due to trade and compare that number to Sri Lanka鈥檚 GDP.
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