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Chapter 19: Q 16. (page 462)
Are the gains from international trade more likely
to be relatively more important to large or small
countries?
Trade gains are relatively more important to small countries.
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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 fine.) 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?
Look at Table 19.9. Is there a range of trades for
which there will be no gains?
Consider two countries: South Korea and Taiwan. Taiwan can produce one million mobile phones per day at the cost of \(10 per phone and South Korea can produce 50 million mobile phones at \)5 per phone. Assume these phones are the same type and quality and there is only one price. What is the minimum price at which both countries will engage in trade?
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?
You just got a job in Washington, D.C. You move
into an apartment with some acquaintances. All your roommates, however, are slackers and do not clean up after themselves. You, on the other hand, can clean faster than each of them. You determine that you are 70% faster at dishes and 10% faster with vacuuming. All of these tasks have to be done daily. Which jobs should you assign to your roommates to get the most free time overall? Assume you have the same number of hours to
devote to cleaning. Now, since you are faster, you seem to get done quicker than your roommate. What sorts of problems may this create? Can you imagine a trade-related analogy to this problem?
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