Eagar aaa A ase E International Economics 12th Edition Salvatore Solutions Manual © vericas Fu POF Pacace QO torso Por (ign POF nt ed © seman, ated ‘Cone Chapin) 21 tion 22 The Mercia’ Viws on Trak “css Sue 21 Ms Morons Views Tae ‘fects 2: Merc Alva Well Tosi Cety 2 Trae Bsc on Abo Abe: Aden Sth Tat Abou Adanage 2 Maton Aha Advan 24 noon Aaa Das Ris 6 Fasc hc La of Comparative Adontge 25 Compurine Adanage wih Opa Costs 134" Compra Adages the Labor Thay of Vale 250 The Opry ent Th 25C The ModucienPosutly Frome Unk Const Cos 2.5 Oppmiy Con Resin Coven Pes 26 The Bs and he Gans fom Tae Un Contant Cots "yon Matignf Ye Gis ete TASS 2 Or ipl Teast Riana Tre Mal Arpsns: A241 Compare Aang sh Moth Tw Canmadis 22 Carne Asap eth Mae fon To Neos we Coon tint = thn Se a secon ne tn aa i = ‘eet tn a Yau ‘etentebemepmatanee othe =a Frome ovecova ecw or aces sits Lae tay fae ane ‘Sass ry Som Steep Mrcniem (Cousntopemeay cot mesa Aa aie Apsolae ange elvcommosy pes vo ieee ae Compe pvitiaton| Un of soma ange Smalley oe met =e sce ie compan katt aver gorse Sika “Tis is a ong and cil cre chap a ay eae frases cone 4 ‘equ et es. wod pcs Seton 2a These as em =e Sehr andthe suger cai aw compra ade nthe sc a of Caper 2, woul cies Seton tly Eromodeetinmanenieboaetnbe Spi af compu abana ig pec amel he ise = tot Ts cal par ae hs aga en (wc ss 5 Ihe ia twa etry a rns! Gan) in th he ama Seem Swncre ‘Splat ie hcl ule ralph set ound ‘tb aw The sinpleLnprscuciy Conon sa toon tow “sowuratostoneinaronesgeceny Imi dev sant molds ang Pron siesta eB gy 3. nthe hi ects woul eve Seton 2 and 26,1 wood pay price OE ‘ono Sioa 2.38 2S aml26 wich ba he caer Soom otc 4 Inge fh estas, woul cone the omni chp. The cia ston Saas a 2 and temo ie concep epan th shape te cron {Mtnmaccrnenopa toner tomes ‘pp ae fr na ld The pis od ea fr be ‘Sivaratecareen yen me onny snsacis Pts —_ — th ce come arte 1. Inca Aste Unio Sass as an abcte ange in whet a he Uni parent Kino ina Inca tbe Uni Sans hs an she advange tat he Unie Kingdom SS ay hasan bse sane} neu comme ‘Ge aneeonouetnc ces nce Gt United Sats hs an sbslteavarag in bt ut as te a toads nr dvs hh Seem =e cas. the Une Sas his an bolt oer he Ui Kina ‘en am eh 7- ho Fetaon ih S804 Sen = 2. Ione A. the Unt Sines hs compari advantage in at he Und = oe examen ethan So In cae Bh Unt Sis fs soaring aang in wha and he Unie conga iy = Kiam ts sero Incase Cth Usted Sites fas copa advange in wheat and he Ui Kino ts Severna tae cas. the Une Sts and ts Uni King ave 3 pan aaa tent anal ncn tae pole hon sbi aang Incas Crisps ston compantv ams Incas, te epi sce the hue atg ha he Unie Sts swede Unted Rigs ete ner comme 1 Te Unio Ses ei 16 1) The Une Kingo sins 4c 1) The Une Se would 1 wth Ud Kid woul in 2 1) The cestn ems for coef prog was nthe Unie Sites a {nd othe Unit King, wth fon soe cnet of Modachg clas Uae God Sec nd 12 c Ut eas. In Ls Stas Pu 0 and Pe-S2.00° Inthe United King, Put. a Pe. Wi the cuca rate of 1-82, R200 and SIO he Uni no so fate Uni Ste will be ale et wht ote Usa ‘po inte Und Ri wal Be Ep a Ud by With the ctctang to oS, Pe=S4.00 and PS i the ied ‘inst he ied Sas woul eto spot hat oe Und ‘Kinga he United Kingdom woul be uae expo an hh othe ‘© WiE1-S1,Py-S1.00 and P-S0SOin ts Una Kingdoms tt ie Uni ign wou Beale eget bth pens othe Uns Site In Unie Sos Pa, ile th Unis King, Pn P= ©) Ie Una tes FPA, whe ah Ud King PP“ Se Pine 2. “Theva pes ae A and A the Unie Sts and te Ute Kingdn, ropetveh The pas of pdt hte te Band he Und Stas {ade Unie! Kio epestngy. The pons of cnmumpie se E and a the Unie Sates an the Ue King pce The at rm alee 2) AF ip gue 25, be gaia ane comely pce whet wou ab by Pu Sete phr Dey Wel Siena he ete! peton of Sas eave te Unie Sats won Suis topically th oct of whet and peace 10, ‘thle the Cased Lgl would cows to specie comply i Ihe Froditonoflthan pic 1) Sin the erin wave comty pie of clot she in a he Fens corny pc of whet the terns 0, thn he oer al ‘Thi hat Bess si dnt 13 th i ne Fig 2, ute caps eters 1S in es Ss teerboanetr eee ei oS en ‘sce tome nr dee Cease int ‘anata dns ae geen n Nesretennpmearon Caen ‘Miter Cum eh Se ety Seria in of oa1e Dona incl Sans a PP=2' mt 1208 inthe Ae ps of ge 23s wuld wa tht the Uni Sts woud not bs ing opine rune he “Te Un! King, en the thr en ou psig eral inthe Fron of chsh nd cache 20 SOW wie Unie Ss, Sa Unit Kimibe tas at US. the priate reve conmaly pe a Porhoa mie Und St th Ul Kina ical the oe ‘Sc ig on pgs 1S an th dcson nts a pagar f Soto 2 65 2) The Radian mel wa std epic by showing the postive eosaton eewsen relive rosie anther of sso UK sport tid Sones and he nepte somtn Bouse rhs ant ts ‘snkeexgere The Raton tale mae! was coined by the postive anti and Serves he athe lier pod ad the rato of US. 10 UK. caps to ihr counis swells te Poa laonstip ea wave un toe ‘onan ea export ) Eventhough he Ricardian mode was re often confi we SSH tool er rods Bone te fone stunt ste tha expling Profs nie ams) and Sonn ay ach paling the St | ‘Scrat tan ung a of deco 4 The Uni Ss hs compare danas inthe pron of eles Reacing ele impor soul Kap US. noes evenly moving ger ihFe bps aman Enis in Shore Sos in Ansucie bon ia Append? {ron and in same son. Tnc man capers coment 3 Sf atic sen oi hd te © pe 1, The Macaig avec sie rads ating i stu ‘Ctieacma of gl th aton sha 5, What pain fittest hohe astm? 4. The comin which he on ah lt bse dnaactage isthe Somme a ats dada Soda ange some dane “Seana anaes ‘aon Aha oper asnug com Xan ao 8 us he Porcine com Y 6 von our of bots nation A ean prose 3X3 whi ton 8 ‘Sanpete IX oY Cd aoe hen pa ‘ton A has compre dsatags in ormady X ‘nao has compre desdhaetogs in sora “cin Abs congas eget X ‘Canon Aha compra brag in ether commodity 2. th ent fe esa a Question 6:PsP 13 inten Sattar abe 5. Wi cfc to th stmt in Quon 6X cache fr ation A gins 2% “ana ps oY aon 8 gin 3 ‘Erion Bs 97 9.Wit referee te semen of Quon ean of mally nel a 1 Ria expine he bw oF compuatv aang onthe ssf se ve saya ae copper cot ty theif dmg es Sloth above 12, Which th fllowing sats ee? The combined demand focach cmt by the wo nations nneavly sled etree ‘echo Sattar ane the reat’ kel wee all he is rom ae ite as om ead ae bel tobe ely red 15. The Rian ade mls bss esl sa sce bigieet Stn ed at hs wee incon Part One: International Trade TheoryChapter 2 The Law of Comparative Advantage born vran te pv power 1. Chapter Outine 2.1Invoducion 2.2 The Mercantila Views on Trade 23 Trae Based on Absolute Advantage: Adar Sith "22a Abele Advantage 2.pisraton of About vonage 24 Wade Based on Corporate Aavartge: Oavit Ricardo 24a The Law of Comparative Advantage 24 The Gas tom Trade 2.42 Exopton the Law of Comparative Advanage 24d Compara Advaroge wih Maney 25 Camparabve Advantage and Oppornty Costs 25a Comparave Advantage an he Labor Theor ot Value 20 The Oppertanty Cost Theory 25e The Prodvoion Posaity Fronee Under Corsant Goats 254 Opporunty Coss and Relative Contnody Prcas £20 The Basis for athe Gans from Trade Under Contant Costs ‘26a aration ofthe Gain en Trade 2.0 Roatwe Commeriy Prices wit Tago 2,7 Epica Tes othe Rican Medel Chapter Summary and Review ‘This chapter intaduces and begins the development ofthe law of comparative vantage. Comparative advarago is tho gencpal dea at ho core of modern ase bey, 9 is wortahae to learnt wel now, Subsegse atera & more complex snd assumes the law of comparatve advaniage & understood and ‘mastered. Consequenty, ie summary of be materiin tis chaptr wilted oe ‘omeshat more extensive tan suboqaet summares (ne prominent view ofc ding the 17 and 18 cents f known a | ‘mercantiiam, Albowgh mercantilim isa most isos election of wrigs by ‘marchans, government oficals, and coonamast thre Isa Gear ted about trace that emerges. The mercarst vew of rade is fat exports shel be ‘rometod because thay produce payments om other counties, while imports ‘Shou bo dscouragod becase thy produce payments ooo counts. Dung {he erent per, gld sve ullen wes the pny foro ome aed ‘svomatonal payments. Ts moant at an exoss of experts over mpors Would (anette a inflow af sh bln. In the mercanbst ow, the accumulation of bbaen fs how @-naton gains rom intomatenal commer. 30 the 1 of overent sto pure potest encourage exports and scourge impor. Mercantile couk be beni ta nation cr pec intrest rou ‘nanaton Merchanscorciuioa spectros group at weld gan eter for the emphasis on increasing ter produton for export ot rom protecting tei mastic acy fom he competion offocign enprts. The mercanilstview 50 ‘may make ence from fhepohntet view obullinganaton sata inte 17" an 12 ‘cenlusea, Tha accumulation of bllon ae reserves can help foance mili consolcate and expand stata power Finaly, an eow ct geld might aso help ‘conomis in recession by Increasing the money suply wich woul promote upland crpienent ‘Tha meant vew of te wat! adm ane, however, that at atins canbe success fom the mercanist pespeciv, Because one nation's ‘expats are some ote natons erp an excess OF expos over pars by ne nation means that rang partners mist mport mee han fey export. one talon gains tom ka, at ost rom 9 mercantit perspec by sues ‘xparsg more han tingors, thn the rates wade partners, 2s a goup must necessary ne Inthe mera view rads a zero-sum gare Alu some ‘tonsil ain rom ra, dined as accumulation of tlle, the remanngraons a¢ a group, mustoes an equa amount Acorn othe mercantile ttheward hen thee werd ga am vadeis aways ra and sions oe piled ‘aint ach carte aren ofirtemtonl wae One stn’ gan comes ony alte expense afaher nations _Atnoughercantism waste prodoninantview ofvade nthe 17 and 8% _— centres tis rpetant ont that made raw frac, ning Se prs and ‘he person onthe street, as wa as national govermenis, areinmany respect sil metcantiss A rade dtc (excess mors ove exports) generates a Good deal Cf nism in he popula press wih demands or oloes wo corectthe statin. “This view olen meets the approval of ezens Ie was largely response to mercaniism that Adam Sth in his closic ‘bok A Inulin Be Nature and Causes of he Weath of Nato, Wich was publchodin 1778, explained how rad pstvcos gains toasters Sith arguod {hat two nations ely ade according fo tek stents hen bth nis wil (an. The stergh of a nation was iri nts flor preducy. The ‘ation wth igh bor product ina good has an abso avariage inthe ‘rodctn ofthe god aso shoul peedce the good for sland cher nations. Innis vewsbom exper and rperts are good hey acur wiliny.araton ‘teat expers good then btn he exporing sell and neering bye must ‘in or the tranacton woud not be wilogy made, Tho concept of absolute advantage canbe explains by considering MO courts, each prosusng two goods wih ene inp, labor, By comparing the ‘reduc of abe, as messed by output per abrer pr ame me pid In ‘ch oun, the absolute advantage ofeach couery can be detertned This is Dest demenstat wh rural xara Table 2.1 proses assumed unis of output pr abrer er some gen tne period, uch 62a for cormeatiesX and Y im Nations 1 and 2. One borer n Naton 1 can proce 10 unis of Commodiy X or 1 unit of ConmodityY. One laborerin Nation 2can produce unit CommodilyX or 20s of Coma ¥. Bsonse Nation # ean produce more of CorimodtyX pa abere han Nao 2, Naton 1 has an abso adrarago inthe production of Conmesity X Naton 2 can podice mae of Comme ¥ pe bre than Nation 1, 30 Nain 2has be _veat advantage in Comedy ccc Conmetyy Pa Civen the peocucvityo abo inthe producton of eammadiis X and the ‘world wl be beter off and each naon canbe beter of Nation 1 prodvcos ‘Commodi X and Nation 2 produces ConmayY. Fr every labore itd am [Commodity te Conmedity Xin Naton tte wl bo 1 unit f Garret ost ard 10 une Carey X gained ln ton 2overy labror ete hart ® ‘Commoaty X10 Commody Y wa reduce alse 1 ua of Commesty X anda (98nof 20 nits of Commeoty¥. Those gan and esses duet a roslecaton of on uit fn each nation labor ae recorded in Tale 22, Tale 2:2 also shows i he last con thet ‘change nto productonin the wot. The conasquenceofrealoraing each ut ‘flor in each non omar the goon uhich tha he abolteaanage = ‘incre nwo’ podcton, Specialization according toabsolute advantage Inereases wortéprosuction. “crane Pema GhangenPrdudenaty 2)Note at his ont that the realccaon of labor does increase production of ‘one good n each nation bul decreases the poducson the Ober good Non ‘hss mare of Commodi X ules of Commo Y, fila Naton 2 has mare of Commodity an ies of Commodity X Wr prodicion ha creased, bt each court hat lose of one apo In example, tn nations could eliza an nee othe avalablty of ‘bath goods i toy exchanges win ach ater. Suppes, gven the changos in jroductenin Tabio22, that Naton 1 exports unit of Commodity Xin tum fer 5 {nist Commodty rom Naton 2. Theesuts are shown Table 3. Tle 29: Goods Avalable Ate Exchanging 5 Unt of Xfor Uns of ¥ ChagenXhambe ts o3) A CT Changeinv nia Mes) 15208) ‘Tho numbers in paenthoses are the production changes fom Table 2210 lwhchexpars ae addedr zor ar subtracted For exarpl, th 195) nun Naion2frthe ‘Change nx valbe rows tha Change n Production om Table 22 pusimpadsc5 unl, Tabe?2 3 shows ha atthe relocation olla, ade ‘nereases he quanti f goats avalabein each nation Each ratoncan be mad bettor of by producing and oxporing the goed in which it has an absolute Aaévantage and importing the goed in which ther rading parner has the solute vantage Inte above example, the ae at which ¥ exchanges for X is Wetec tve. “Thee aretha rate at uhch¥ wil exchange for or whieh bo nabons gn, bt 10 tho gains from rade willbe cso ifort tan is shown in Table 23. Tho ‘ate awhichgoadswalode and how ne gs wilbedstabled been nations willbe develope in Chater Tho caoept of absolve advantage ngs up the gueson f what happens ‘ahen one county has the absolute advantage n bath goats an exarpe of hich [5 own n Table 24. Ina two-naon, wegood mee wl te natn wih the beaut advantage in both goods out-compot the cher nation? Aconrbuton of ‘habits economst Davie Resco 17721825) etalon wae ther Was show that is comparative advantage rather tan abeokie advantage tht ‘tenes the pater of race beeen counts, athoughinmanycaresthatoo ‘vantages ae ental Ce a Comesyy 8 Ita naion nas an absolute advantage in Both goods is comparative ‘acvantageessts wheres absolute advantage is eave greater anation thas an absolute disadvantagein both good its comparative advantage iss where its absolute eisadvantags is relatvly smaller. ln Tete 24 Nason haste absolute advantage in oh goods button ‘sect aovaniage i eael ager fo Comme X (ate to-one rato) than {or Commo a nedo-one at) S0Naton thas acamparaive atanage Commodity X_ Nain 2 has an ataokte dacvertage 9 both onan, But As <észdvartge is relatvaly losin Comedy ¥, 50 Nation 2 has a compaaive ‘vantage in Comme Bass on comparative advantage, Naton 1 shoud special Commosiy >andexporitto non 2in exchange fr Commas ¥. Nation 2 shuld speciale ‘n Conmosty ¥ ana export itt Nalin 1 in exchange for Commodi X To show hi, assume a eatocaton of labor in each naton, Let Nation realocat 1 Iabrertowarés Conary X, the god in which Naion + has @ Comparative advaniage Lat Naton 2 reac 7 bores towards Comenay Y, ‘he goin which Naten 2 has a comparative acvanage. AS shown in Tale 25 ‘word prosucion woreaces 25 tone specialize sesotsng 10 cimparatve ‘vaage. Specialization according to comparalve advantage can nerease ens proauetionTaton Tata? WS Change Fomion sR =O ChangeinProamondty BT [AS inthe case shown in Tale 22, speciation does increase worl srodcen and te grodcton a one commas in each ation, be prasucon lhe oer canmmoaly i reduced n each natn. Exchange, however. can now ‘horace ti ama of oth commacies avaistein oth naone,Aseu hat Unis of Xenchanga for une oY W Nation 1 expat unt of X inet or 8 [nis of. then Nation 1 wl have mor of bath goods. This ae of exchange wil ‘moa Nation 2 impor 8 units of Xand exports Gums of. The gaads avai 0 ‘ech nan a 2 esl fhe exchange are shown in Table 26 Hata FTOR) FATT ovate +1656) +1(78) han ecaue speciaieaon creased th amount goede sual thre mut ‘be some way to share tho increased pructn o ako bo nations beter of Exchanging athe rte of 8 ut of Xfor 6 uns of isons ay to meoase he ant of btn goods in bot nations. Tha concsions wert surimarng and emphasing: Evonifanationhas| ‘an absolute advantage in the podvcton of both goods, two nations can ‘engage io mutually beneial ede teach nalion specializes n and exports the good in wbich thas the comparative advantage, ‘Tho poi of comparative advantage can als be understodin to actos cf indus finals do ot specie and exchange, hen eae nd ‘must retical the gos that ach vial consumes. Coir yeu own Consumption i you had to produce al of the goods that you ensume, 2, ‘svomebies, houses, a rave educaton ches, food ee Invisial pecaice ‘ort mateo prosucton an hen exchange in oro Yate those gins 2 ‘tom production Wnt heal to exchange goods an serves, we woul De rable to ade the suri of gods in rich we specataefor he surplus of gods Invtich oer pecaliz.Athoush so auioney may be sppeaing, te cx of itsuleay i sgrcanty over sandr of ng, ‘The above description of vade was desenbed in ems of basting same rumbor of units of CommedyX for sore rub of wits of Commodity ¥. ‘Dated monetany exchange cdcd, whereby ney i exchenge Xan ‘thon te eatcomes ae entcal to he bate nals Ina monctary economy exchange thos lace on he bass of manctny ‘estat each non zen conver other ann caenay using an exchange ‘at If forerampe. good X hats produced inthe US has sling pice of SZ and the exchange rate 20 Mexian pesos per dota, then the pce ofthe good © Meicans 3 40 pesos. Mexicans wil caroare at 40 peso pre fr ood X jroduced inthe US we pice of goo! X produced in Mex, The pee ofa ‘920d, tu, depends upon the cst ef preduing wich dependent on the ‘tage rte of abo and the pod fsbo. ‘Suppse att some wago rates in US and Mosco and some exchange ‘ate between the peso and he US doa thal the US has cheaper prices fora (eods.Athough ts station posible, ts a csequlbaum Suton fat anno! ‘bemaintaine. Thorewilbe comand, emo natons. forthe preducs fhe US ‘btn demand fore rst of Meno. Th deman er fe procul peeduces ‘by ho laborers US wil cause ho wage ain the US increase late tothe wage rate eco, ad he os f 8 dalla one foreign exchange marketIncrease. The increase in US wages ad the cos ofthe dar on the foreign ‘xchange mart willause the re of procs produced in the US to nea. ‘Te kof mand fr products roducedby th laborers of Mosico wilco he ange rte Mexico fo decrease, and te oot of peso onthe fregn exchange ‘mati! 1 fal ath of whieh wl ower the pce of lexan produ. Ths wil Continuo unl here fs some demand for Mexian prods, The wt ao hve fo be domang fr US pros or he reverse would ccc. The produc in which Hesico wil overtly compete wil be the producti which « has the smafer beaut Ssadvantage because pices wl ol have fal 5 much fo this prot inorder to make Mexico compttve. An example of camparve advantage in a ‘monetary eoosomy and possi uum wages an exchange ales OWES In Queston ot Secton I below Tho comparative advantage mada ots ho argument that naons wih ere etme ime ot aa a with righ prosuctty wl papal ou-competenatons with mer producti. 1s not wages alone or peducty lone tat Gaersnes conpetveness, bt ‘wages relate opredutivy Mone nationhaslower pres for al goods eo ew ‘anges tenis adsequlviom suntion This"sweaahop labo gue ast onside hatin such a stun, wages, the vale ofa natons currency and he pees of i goods wil increase. Simin, high pesicivly aons wll nok onthualy cu compete lw produtty aon. Ia naton nas lower pes fra ‘ods duo fo high producivty, tan iis aso a seguir stuaton that wil produce an increase n wages, the vale ofthe nation's curency, andthe pices of is goods Comparative advantage was identified above as greater lava abecite ‘vantage or sale relate absolule deadvaniage. A mote sppeaing ane ‘Suvalen explanation of comparaveavantape sneer of opportunity cot ‘The opprtuniy east of ne unto a goods defined as te ander of units of one god foreponeinerder te prosuce oe unio nater goo, Fer xara 4 unt of Commodity ¥ must be given upto release the resnures neces 0 produce 2 unt of Commosty X then te opparunty cot of Comat Xl. ‘This can be ween as, Opponnty Cost of one unto ava “The refers to the quaity of good ta must be given up in order release te resources (hs cae, abo nessa fo produce 1 un god x Inccate tne opportunity ost good Xin Nation 1a (4X) ad in Nation 2.98 (AYISX). Now suppose tat (SY/AK) «(AYA Ths 858 the aroun of ¥ {nat mustbe gven pin Nan 1 rode aut of Xess than sto Non 2 In producing CommostyX tf bate fori to be produced in Naton 1 because ‘ower uns ef CommaatyY willbe gven upto reduce Comey X Becausa tho ‘oparty cost Xs twernNation 1, Nation 1 ha a ompartve advange a the production of ocd X.Retur to Tale 2 and very that Nation 1 has ower ‘nporunty cost producing Commosty X han Naton 2 and hatNaton 2has@ ‘omer opportunity cst in prasucng Comat Expressing costin terms of opportunity cost make it apparent tat ioe ten has a compsratve adariage nthe production of ne gd, tan te cher ration must ave compare avanige nthe other good To see srt re thal opprunty cost ofX VIAK. iusto invers ofthe opportunity cst of “ “The inverse of AVIAX i SX, whichis the number of ns OFX given uP fo produce one unt a i (oven) < avy, ‘hen tis nessa he ease that(axsayy > (axa IiNtlon 1 has a lower opportunity costforX then Nation 2 musth ‘owar opportunity cost for ¥. Thus, itis Impossioe for ane nation to hav comparative advantage in the production of bath goods. . Questions: 4. The ouput pr laborer er day in tho production of compuors and avis in Naton Tandia Naton2 sre gan nthe ale bean Comput 6 2) When nations the absolute sovartage mach good? Fain re lanes inthetabe bel, assuming tht one unt oor waned ‘nach county towards the good in whch thas the absoho advantage _cnanges in Production rom Resiaatng One Uni of Labor Change Praacion TAS Change Preton of Contre .) Wi bo nations gaint 4 autos can be exchange for computers? <6) Wit both nations gin t2 autos can be exchanger 6 computers? 2) Wil both nations gan {2 aus can be exchangodfor 4 computer? 6 ‘nwnatco your answer sugges bout eect the terme ott8d6 on he gins ‘romvadefer ech nations and whata mutual benetclaltrms fade might be? 4) Cala the opparunty cost one automobile In each court. Cala the opporunty cost one camputr in each county. 5) Do Nations 1 and 2 have a comparative advantage in the Same good ia which ‘sscn hasan abeoieacvartoge? 2. The cups por labore per dy for Tanzania an Ze for fh ar aber are ‘von the tbl blow 2) Which nations the absolute sevartage nach roc? Cava th opportunity cost ofa unitof Lumb in Tanzaria an in Za, 6} Which nations th comparative advantage in ach product? 6) Suppose 200 eaabor-days are aaliein Za, and 200 tal abr ys are ‘valle in Tarzana. Assuring fe numbersin the above table are constnt at eves of preducin, daw he production possibilty Wonte or Tanzania aoe Zave ing 216 «sitinthjointnerest cf Tanzania and Zaire completa specialize nth good ‘vhich each has te compare advatage? {Suppose each naton does completely specialize inthe good in wtchithas comparative advantage. Use ieate these production pois n Fi 2 1 Refer totetebe and ne production poss tonters produced in Question 2. 2) Assume that Tanzania cogstaly specializes nthe produc of ub. ') Whats the cpportunty est of abtaning 6Fehin Tanzania? 1 Caleuare (AFL rane Wa Tanzania tng export Lubes in change or Fi om Zak ats cfintematona race re & Limberfor6 Fis? ) Wt Tanzania willingly wade with Za the terms of wade are 8 Lumber or 5 Fan 6) Wi Tanzania wold the emis of rade are 8 Lumber fr T Fisk? ©) Basa cn your answer par cele the cet nequalty below if Tanearia is to gain tom ade (a aLrometran > OF < (FAL ‘Cae (AFL one 9) Cala th acceptable terms of wade for aire 1 Cacao ho range ofthe peso terms of rade that willbe acceptable wo bath Tanzania and Zaire 4. Te cutpus per abrer pr da or wine and cheese for France and he US. are ‘Proviod in he ato bow. Labor th oy int 7 Fons US ‘The curent wag asin Franco 40 Eure pr day, whiointhe US. 815100 er ay. Assume that the cure exchange rate sone Eur per en US. dla. 4) Fit head nso, calouating French pce using the wage rte of 40 Eos Ber day andU.S poss using the wage te o S100 per day Wh abr ashe cly put the pce of cheese and wine wil eq the cost of abr to proce at choose markets ae compative (pica equals he average cost of producon i ompeiive mares ite ng un} Far example, he pre of wine in France 8 Euros becouse one laborer mekas § una of hseae ana one laborer cost 40 Eros (Pres = WagePreductonporiaborer) Pres of Wine and Cneese France ana th US.“Fiesa Wire wees) *nce of Cheese (in Eures) = ee eee eee a Pkalay eee eee eee 7 | se ED @ eaten eee ears aera lr re elope plan rene cow lelshendhce emmstonah tcoremice-1 2th Bin Solvation Feat ee ee eee ane Suovreee tre s aon rien od oe tre a Sees eee ee ———— Pigeon bie tog plea mec a = ee eee oe Seeccncieeesterenceces =a ® ns a ACTEM WO OTERUNANTS OF TRA MOLE store(pars) zm ‘keer noes 01s Atne =| 2) Draw he aay production posit toner for each naten wh Beydeson te aan ‘eral scp tater cones ie ) hich nation has a higher sandard of thing bore wade? (Assume the aera a population the same ashe number ef aberers.) Caleuto the opportunity cost of a pai of Shoes in each aon, and the ‘opportunity cost fa Bye each nation tn oes ae = 4) Can hese to maton, wih very dierent standards of ving, neil wade owns uae vat each ctor? 2) Suppose now that one laborer Naton 2 can prouce 30 unis f Shoes oF 30, bootna, eset tana nee ‘lytes pe day. Can ese two rats benetiy ade wih each oe 07? repeinasenees cme = 6. Te prduetonposlty Kons fortwo counties re shown in Fig. 22. Sees ewe 22 Patton iy rion ewe 23 Won an Doman eat = e ‘noe am : cree cot pret = 2) Which nation has te comparative atvanage in good X? Exlan in toms of coe es : pparunty cast. ebestRend olen kgeenemn »b) What do these linear reductonpossbilly Hones assume about haw costs ‘Serene = chango as poducten| Perens ° ‘avr E Tal er Sty Ge {enone Gow dad eae«) Basen the roduton possi onersinFig 2 2,whit ae the valies of sedi a Fig 237 compan ert een goa SLs <4) How cue of goods X an i produces by ach nation werd demandisD in — aie Stomint tmp <2) How much of goods X ana is produces by ach nation f werd demandisD xin ‘epee dri Compaen Tele Fig.237 a 1 How much of goods X and ¥ is produced by each nation if wot demand is D «in Seon Sheetynee Foose 7. card's concep of comparative vantage shows that rade can occu the ee = ‘te oi een acon cores oepeins) 5 Basson Pee 2m nomenon cesemce cane exportpeomance ot the US rela othe UK. be nln by aie nba proaiivs? suena tonn oh oe 1) the Reardon motte toed anne iar pedravin ta eons cot Parent nenrernt ra cain eve or pes mgt bor Pesky ier sess sic estan cai oer ei het mt Aete Ipc oespgeotes » ee