10) Explain the connection between the US trade deficit and financial capital flows.
14) Suppose Laborville has 100 workers and 200 machines while Sleepyville has 20 workers and 80 machines. Which country is labor abundant? How do you know?
15) Using the data from #16, suppose that each country produces both nachos and cell phones. If 1 worker and 1 machine is required to produce phones but 2 workers and ½ of a machine is required to produce nachos, which country will specialize in the production of phones and which in nachos if the countries open to free international trade?
16) Explain the difference between absolute and comparative advantage.
17) Explain why a trade deficit provides advantages to a country. Is it always advantageous? 18) Explain how comparative advantage determines the pattern of trade. Use an example to aid in your explanation.
19) Explain how factor abundance can explain the pattern of trade.
20) Explain why international trade is not a zero-sum game.
10) Explain the connection between the US trade deficit and financial capital flows.
14) Suppose Laborville has 100 workers and 200 machines while Sleepyville has 20 workers and 80 machines. Which country is labor abundant? How do you know?
15) Using the data from #16, suppose that each country produces both nachos and cell phones. If 1 worker and 1 machine is required to produce phones but 2 workers and ½ of a machine is required to produce nachos, which country will specialize in the production of phones and which in nachos if the countries open to free international trade?
16) Explain the difference between absolute and comparative advantage.
17) Explain why a trade deficit provides advantages to a country. Is it always advantageous? 18) Explain how comparative advantage determines the pattern of trade. Use an example to aid in your explanation.
19) Explain how factor abundance can explain the pattern of trade.
20) Explain why international trade is not a zero-sum game.
Related textbook solutions
Related questions
Draw the graph carefully. Please use one graph per country and show both the autarky and the free trade equilibrium on each graph.
Consider the following data on the factor endowments of two countries A and B:
|
Countries |
||
|
Factor Endowments |
A |
B |
|
Labor force: L |
100 workers |
50 workers |
|
Capital Stock: K |
60 machines |
10 machines |
a. Which country is relatively capital abundant? Which country is relatively labor abundant? Explain (calculate the ratios).
b. Supposing that cars are capital intensive relative to shoes, which country will have a comparative advantage in the production of cars? Of shoes? Explain.
c. Graphically demonstrate the pre-trade and post-trade equilibrium between these two countries (production and consumption points). Draw a Demand Diagonal. Find and label the trade triangles for each country.
d. Which factor gains and which factor loses when trade arises between these two countries? Explain precisely.
