Question

In: Economics

Assume that at maximum hourly productions levels, the United States can produce either 8 yards of...

Assume that at maximum hourly productions levels, the United States can produce either 8 yards of fabric or 4 bushels of wheat, whereas Japan can produce either 5 yards of fabric or 6 bushels of wheat. Based on this information,

A.

both nations will gain from specialization and trade, with the US exporting wheat to Japan, and Japan exporting fabric to the US.
B.

the United States will benefit from trading but Japan will not.
C.

both nations will gain from specialization and trade, with the US exporting fabric to Japan, and Japan exporting wheat to the US.
D.

beneficial trade is impossible between the two countries.

2-

  1. Many electrical and gas utility companies are monopolies because of

    A.

    patent restrictions.
    B.

    their inability to earn profits.
    C.

    the absence of economies of scale in that industry.
    D.

    government regulations that create barriers for new firms to enter the market.

1 points   

QUESTION 3

  1. Maria buys several cups of coffee every day between classes. The first cup of coffee always tastes wonderful. The second does not taste quite as good as the first. The third does not taste quite as good as the second. Maria is experiencing

    A.

    the coffee drinker’s paradox.
    B.

    the elasticity of demand.
    C.

    the law of diminishing marginal utility.
    D.

    irrational behavior.

Solutions

Expert Solution

According to the comparative cost advantage theory of international trade, each country can gain from trade if each country specializes in the production and export of those commodities in which it has comparative cost advantage over other country.

Opportunity cost of producing one unit of a commodity is the amount of other commodity that has to be given up to produce an additional unit of a commodity.

A country has comparative advantage in the production of a commodity over other country if it can produce the commodity at lower opportunity cost comapared to other countyry.

United States can either produce 8 yards of fabric or 4 of bushels wheat

In united States, the opportunity cost of producing one yard of fabric = 4/8 =0.5 bushels of wheat

Opportuniry cost of producing one bushels of wheat = 8/4 = 2 yards of fabric

Japan can produce either 5 yards of fabric or 6 bushels of wheat.

In Japan, opportunity cost of producing one yard of fabric = 6/5 = 1.2 bushels of wheat.

In Japan, opportunity cost of producing one bushel of wheat = 5/6 = 0.83 yards of fabric

In the production of fabric, United States has lower opportunity cost(comparative advantage) over Japan. In the production of wheat, Japan has lower opportunity cost(comparative advantage) over the United States.

Therefore both nations can gain from specialization and trade with US exporting fabric to Japan and Japan exporting wheat to US.

Correct option is C and all other options are incorrect.

Rahul Sunny answered 1 year ago
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