A large number of cattle are found to have mad cow disease and as a result,...

Consumers will move to a point lower down the beef demand curve.

There will be an upward movement along the beef demand curve.

The beef demand curve will shift to the left.

The beef demand curve will shift to the right.

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.

Solutions

Expert Solution

A large number of cattle are found to have mad cow disease and as a result, consumer confidence in the safety of beef is shaken. What would an economist predict will happen to the demand curve of beef?
C. The beef demand curve will shift to the left.
Reason- Owing to the fact that the consumers' confidence in the safety of beef is shaken, the demand for beef will fall. As a result, the economist will predict that demand curve of the beef will shift to the left. The quantity demanded would not change because price of the beef have not changed. Hence, the consumers' won't move up or down the demand curve.

C. Both nations will gain from specialization and trade , with US exporting fabric to Japan, and Japan exporting wheat to US.

Reason - This is because the comparative advantage of producing fabric is more in Japan which is 6/5 is than in the US which is 1/2. Thus, US should specialize in producing fabric. Similarly, the comparative advantage of producing wheat in Japan (which is 5/6) is less than the comparative advantage of producing wheat in the US which is 2. Thus, Japan should specialize in producing wheat and will gain from it by exporting it to the US.

Rahul Sunny answered 1 year ago

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