What is absolute advantage in trade theory

Assignment Help Macroeconomics

Reference no: EM133376967

Discussion Questions:

What is absolute advantage in trade theory?
What is the comparative advantage on international trade?
How does absolute and comparative advantage lead to specialization?
What are the benefits of comparative advantage?

Calculations:

The following represents the production possibilities in the following two countries.

Canada Mexico
Good X	Good Y	Good X	Good Y
0	32	0	24
4	24	4	18
8	16	8	12
12	8	12	6
16	0	16	0

a. Which country has a comparative advantage at producing Good X?

b. How can you tell? (Hint: opportunity cost)

c. Which country has a comparative advantage at producing Good Y?

d. Indicate how both countries can gain from trade?

2. Untied States can produce either 18 oranges or 9 apples in an hour, whereas, Mexico can produce either 16 oranges or 4 apples in an hour.

a. What are the opportunity costs of producing 1 apple for United States and Mexico respectively?

b. What are the terms of trade between apples and oranges that would allow both Untied States and Mexico to gain by specialization and exchange?

Reference no: EM133376967

Questions Cloud

What is the sharpe ratio of your portfolio : FIN 7520 William Paterson University What will be the expected return of your client's portfolio and What is the Sharpe ratio of your portfolio

Postal service orientation problem : Describe the nature and causes of the U.S. Postal Service orientation problem in this case.

Consider legislation reducing the maximum work week : Vermont Senator Bernie Sanders has said that he would be willing to consider legislation reducing the maximum work week to 32 hours without any reduction

Occasionally managers choose to enhance communication : Occasionally managers choose to enhance communication by using the telephone as the only mode of communicating.

What is absolute advantage in trade theory : What is absolute advantage in trade theory? What is the comparative advantage on international trade? How does absolute and comparative advantage lead

How is money & credit important in contributing for growth : How is money & credit important in contributing for growth of banking & finance sector, thus boosting the developing economies ?

Does the cost of living factor into your decision : Have you always lived where you live now? Where else have you lived as a child or an adult and how did the cost of things like food, gas, entertainment

Effective knowledge management system : An effective knowledge management system should include a common framework for managing knowledge and some ways of validating

Describe the representative consumer lifetime budget : how the representative consumed in the textbook macroeconomic models maximizes their utility? what is included in macroeconomics variable nfp , I , C ?

User Account

All Pages