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  Canada Japan
Beef 6 5
Computers 2 4

For the below question use the data above and provide a brief explanation and show your work.

Which country has the absolute advantage in beef production?

Which country has the absolute advantage in the computer production?

Which country has the comparative advantage in the beef production?

Which country had the comparative advantage in the computer production?

What are the limits of the terms of trade?Specifically, when Canada willing to trade Japan, and when is Japan willing to trade with Canada?

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Sonal Bahl
Sonal BahlLv10
29 Sep 2019

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PART B – Questions 10 – 27 Use the following assumptions to answer all questions: • There are three countries – Argentina, Britain and Canada. • Each country produces and consumes two kinds of goods – crude oil and beef. • All countries make their goods from a single type of input – labor – and each country has 700 hours of labor available to produce crude oil and beef. • Each country demands 5 (five) barrels of crude oil. This assumption simply means that a country must have exactly 5 barrels of crude oil – it may produce them domestically, it may import them from abroad, or it makes some domestically and imports the rest. • Countries produce goods using the technology described in the table below Technology Hours of labor needed to produce one unit of good Using the above assumptions, answer the following questions: • Calculate the quantities of crude oil and beef produced in each country in autarky (when they do not trade and each country produces its own crude oil and beef) • Order the countries according to their absolute advantage in production of crude oil • Order the countries according to their absolute advantage in production of beef • Consider the case where countries are free to specialize and trade. In the table below calculate each country’s opportunity cost of producing one unit of each good. • Calculate the quantities of crude oil and beef produced in each country, consistent with the country’s comparative advantage. Based on the above calculations, answer questions 10 through 27: Consider autarky, when countries do not trade and each country produces its own crude oil and beef. 10. In autarky, Argentina produces _____ barrels of oil. a. 0 b. 5 c. 10 d. 15 11. In autarky, Britain produces _____ barrels of oil. a. 0 b. 5 c. 10 d. 15 12. In autarky, Canada produces _____ barrels of oil. a. 0 b. 5 c. 10 d. 15 13. In autarky, Argentina produces _____ pounds of beef. a. 0 b. 70 c. 150 d. 400 14. In autarky, Britain produces _____ pounds of beef. a. 0 b. 70 c. 150 d. 400 15. In autarky, Canada produces _____ pounds of beef. a. 0 b. 70 c. 150 d. 400 16. Country of _____ has absolute advantage in production of crude oil. a. Argentina b. Britain c. Canada d. No country 17. Country of _____ has absolute advantage in production of beef. a. Argentina b. Britain c. Canada d. No country Consider effects of specialization, when countries are allowed to trade. 18. When countries specialize, Argentina produces _____ barrels of oil. a. 0 b. 5 c. 10 d. 15 19. When countries specialize, Britain produces _____ barrels of oil. a. 0 b. 5 c. 10 d. 15 20. When countries specialize, Canada produces _____ barrels of oil. a. 0 b. 5 c. 10 d. 15 21. When countries specialize, Argentina produces _____ pounds of beef. a. 0 b. 700 c. 150 d. 400 22. When countries specialize, Britain produces _____ pounds of beef. a. 0 b. 700 c. 150 d. 400 23. When countries specialize, Canada produces ____ pounds of beef. a. 0 b. 700 c. 150 d. 400 24. Country of __C___ has comparative advantage in production of crude oil. a. Argentina b. Britain c. Canada d. No country 25. Country of ___A__ has comparative advantage in production of beef. a. Argentina b. Britain c. Canada d. No country 26. Countries gain from trade because specialization increases ____. a. Trade deficit b. Unemployment c. Efficiency d. Inflation 27. Countries should trade with trading partners that _____. a. Are equally technologically advanced b. Use superior technology in every industry c. Use less advanced technology in every industry d. Use different technologies, because trade benefits all

Production per unit of labor hour UK US Wheat 6 1 Furniture 6 3 1. Which country has absolute advantage in the production of Wheat, of Furniture? 2. According to the absolute advantage theory which country will export Wheat?: 3. According to the comparative advantage theory how much is the opportunity cost of Wheat production in UK and in US? 4. According to the comparative advantage theory how much is the opportunity cost of Furniture production in UK and in US? 5. When trade opens according to the comparative advantage theory which country will export wheat? Why? 6. When trade opens according to the comparative advantage theory which country will export Furniture? Why? 7. At autarky price (before trade) what are the relative prices (domestic cost ratios) in UK? 8. At autarky price (before trade) what are the relative prices (domestic cost ratios) in US? 9. If trade between them take place at terms of trade of 1 W for 2 F why each country benefits from trade? Explain.

1. Use the information in the table below to answer the following questions.

  US Argentina
wheat 300 20
beef 100 20

(a) Does either country have an absolute advantage in the production of wheat or beef? Explain.

(b) What is the opportunity cost of wheat in each country?

(c) What is the opportunity cost of beef in each country?

(d) Analyze comparative advantage and opportunities for trade between the U.S. and Argentina.

2. Suppose that China is labor-abundant country and U.S. is capital-abundant country. iPad is capital-intensive and cloth is labor-intensive. Show that U.S. exports iPad after opening up to trade using Heckscher-Ohlin model.

3. Explain the immiserizing growth using standard trade model.

4. Consider the following Heckscher-Ohlin model: there are two countries, America and China, two goods, high-tech manufactures and low-tech manufactures, and two factors of production, skilled labor and unskilled labor. America is skilled-labor abundant and China is unskilled-labor abundant. High-tech manufactures are skilled-labor intensive and low-tech manufactures are unskilled-labor intensive. What happens to the price of high-tech manufactures relative to the price of low-tech manufactures in America following trade?

 

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