ECON 1102 Lecture Notes - Lecture 20: Offshoring, Shortage, Autarky

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burgundywalrus306

15 Oct 2018

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Econ 1102 - lecture #20 - chapter 32 continued. Two goods being produced: roses (in tonnes) and computers (thousands) In a year, finland can produce 10 tonnes of roses or 30 thousand computers. In a year, spain can produce 20 tonnes of roses or 40 thousand computers. Spain has an absolute advantage in producing roses and computers. Oc rose (finland) = 3 computers, oc rose (spain) = 2 computers. Spain should specialize in rose production, and finland should specialize in computers. 2 computers < price of roses < 3 computers. That means finland could be consuming 12 tonnes of roses (30/2. 5 = 12 tonnes of roses) and. Spain could be consuming 50 computers (20 x 2. 5 = 50 computers) Case 1: world price > domestic prices, canada exports aluminum: exports occur whenever there is excess supply domestically at the world price.

Related Questions

1) The following table shows the production capabilities for extra workers for New Zealand and Australia in potato and carrot harvesting.

Output per Additional Worker per Annum

	Potatoes	Carrots
	(tonnes)	(tonnes)

New Zealand	60	90

Australia	50	30

i) Identify which country has an absolute advantage in harvesting potatoes and which country has an absolute advantage in harvesting carrots.

ii) Based on the table above, provide the missing answers to the following questions as a ratio:

1) New Zealand must give up _____ tonnes of potatoes in order to produce one additional tonne of carrots.

2) Australia must give up _____ tonnes of potatoes in order to produce one additional tonne of carrots.

3) The opportunity cost in New Zealand of producing one tonne of potatoes is _____ tonnes of carrots.

4) The opportunity cost in Australia of producing one tonne of potatoes is _____ tonnes of carrots.

iii) Using the information from (ii), analyse whether there is a basis for trade between New Zealand and Australia. If there is, identify what products each country should produce and trade.

crimsonimpala955

Suppose that Spain and Sweden both produce fish and wine. Spain's opportunity cost of producing a bottle of wine is 4 pounds of fish while Sweden's opportunity cost of producing a bottle of wine is 10 pounds of fish.

By comparing the opportunity cost of producing wine in the two countries, you can tell that ( Spain or Sweden ) has a comparative advantage in the production of wine and ( Spain or Sweden ) has a comparative advantage in the production of fish.

Suppose that Spain and Sweden consider trading wine and fish with each other. Spain can gain from specialization and trade as long as it receives more than (1 or 1/10 or 1/4 or 4 or 10 pounds ) of fish for each bottle of wine it exports to Sweden. Similarly, Sweden can gain from trade as long as it receives more than (1 or 1/10 or 1/4 or 4 or 10 bottles ) of wine for each pound of fish it exports to Spain.

Based on your answer to the last question, which of the following prices of trade (that is, the price of wine in terms of fish) would allow both Sweden and Spain to gain from trade? Check all that apply.

A) 9 pounds of fish per bottle of wine

B) 1 pound of fish per bottle of wine

C) 16 pounds of fish per bottle of wine

D) 2 pounds of fish per bottle of wine

indigoserval31

Suppose that the U.S. and Brazil produce only two goods --- computer and coffee. The table below gives its production possibilities.

Computer Opp Cost Coffee Opp Cost

U.S.: 12 4

Brazil: 5 10

1. Draw the graphs of the production frontier for each country. Make sure that you level the diagram properly and indicate the name of the country under the graph.

2. What are the opportunity costs of producing each good in the two countries? List them in the table.

3. On which good each country has a comparative advantage?

4. Which country exports computers? Coffee?

5. What is the range of TOT in which only Brazil gains from trade?

6. What is the range of TOT in which only the U.S. gains from trade?

7. What is the range of TOT in which both countries gain from trade?

chocolatetiger413

ECON 1102 Lecture Notes - Lecture 20: Offshoring, Shortage, Autarky

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