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Chapter 20: Q 28. (page 494)

Can a nation鈥檚 comparative advantage change over

time? What factors would make it change?

Short Answer

Expert verified

Of course yes, a nation's comparative advantage changes over time.

Step by step solution

01

Step 1. Definition

Comparative advantage is defined as the capability of an economy to produce a good or service at a reduced opportunity cost as compared to its trading partners.

02

Step 2. Explanation

A nations comparative advantage may change overtime because a product in which a nation have comparative advantage over others depends upon various reasons like domestic firm's production, specialization, capability, etc. so if there is a negative change in these factors there is a negative impact on the comparative advantage of that country.

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Most popular questions from this chapter

What are the two main sources of economic gains from intra-industry 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.

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.

a. Who has the absolute advantage in the production of rubber or radios? How can you tell?

b. 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?

c. 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?

d. In this example, does each country have an absolute advantage and a comparative advantage

in the same good?

e. In what product should Japan specialize? In what

product should Malaysia specialize?

True or False: The source of comparative advantage must be natural elements like climate and mineral deposits. Explain.

Are differences in geography behind the

differences in absolute advantages?
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