3. (10 marks) With each unit of resources, Country A can produce 4 cars or 600...

3. With each unit of resources, Country A can produce 4 cars or 600 microchips while Country B can produce 8 cars or 800 microchips. Suppose these two countries engage in international trade. Currently, 1 car can be exchanged for 120 microchips in the international market.

a. Find the opportunity costs of producing one car for these two countries respectively. Which country has a comparative advantage in car production?

b. Which country, A or B, should sell cars in international trade? How much would each country gain respectively from trading one car in international trade. Show your calculation.

c. Suppose, to protect the environment, the citizens in Country B will not drive any more and they won’t need to buy any cars at all. Should Country B only produce microchips? Explain.

Solutions

Expert Solution

country B is more comparative advantage than country A

Thank you.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

American and Japanese workers can each produce 4 cars a year. An American worker can produce...

American and Japanese workers can each produce 4 cars a year. An American worker can produce 10 tons of grain a year, whereas a Japanese worker can produce 5 tons of grain a year. To keep things simple, assume that each country has 100 million workers. Construct a world production possibilities frontier, assuming our world consists of only the U.S. and Japan. 5.1 What is the maximum amount of grain our world could consume if the world wished to consume...

If Blue country uses it resources to produce q-tips, it can produce 100 units. For the...

If Blue country uses it resources to produce q-tips, it can produce 100 units. For the same resources, Blue country could choose to produce 25 units of pens. For Green country, it is either 90 units of q-tips or 30 units of pens. Alright, first of all, who has the absolute advantage in q-tips, pens? Who has the comparative advantage in q-tips, pens? Should this countries trade? If so, at what “price” range?

With the existing resources in these 2 countries, Wakanda can produce 42 TVs or 14 cars;...

With the existing resources in these 2 countries, Wakanda can produce 42 TVs or 14 cars; and Gotham can produce 50 TVs or 25 cars. Wakanda should import cars from Gotham and export TVs to Gotham at the same time. * True False The law of diminishing return says that as you consume anything, like milk, the level of satisfaction you're going to get as you continue to consume the milk is going to decrease over time. * True False...

4. A small country is producing potatoes and carrots. Every worker can produce either 3 kilos...

4. A small country is producing potatoes and carrots. Every worker can produce either 3 kilos of potatoes or 9 kilos of carrots per week. Use the Ricardian model to answer the following questions. Assume throughout that consumers want to consume at least a small amount (i.e. not zero) of each good. a) Draw the Production Possibility Frontier (PPF) for the country. Moreover, in autarky when the country is not trading with any other country, what will the relative price...

Canadian and Japanese workers caneach produce 4 cars per year. A Canadian worker can produce...

Canadian and Japanese workers can each produce 4 cars per year. A Canadian worker can produce 10 tonnes of grain per year, whereas a Japanese worker can produce 5 tonnes of grain per year. To keep things simple, assume that each country has 100 million workers.a. For this situation, construct a table like what we had in the class.b. Graph the production possibilities frontier of the Canadian and Japanese economies.c. For Canada, what is the opportunity cost of a car?...

Country A can produce one Outfit in 6 hours and one unit of Corn in 2...

Country A can produce one Outfit in 6 hours and one unit of Corn in 2 hour. Country B can produce one Outfit in 17 hours and one unit of Corn in 6 hours. Which of the following statements is true? Group of answer choices If trade opens, Country A will tend to specialize in the production of Outfits while B will tend to specialize in the production of Corn – then gains from trade would typically be possible. None...

Question 1 (Topic 4) - 10 marks The unadjusted trial balance of Helena’s Hire Cars is...

Question 1 (Topic 4) - 10 marks The unadjusted trial balance of Helena’s Hire Cars is shown below (ignore GST). Helena’s Hire Cars Trial Balance As at 30 June 2019 Account Debit Credit Cash at bank 18,140 Accounts receivable 21,340 Office supplies 640 Prepaid advertising 3,880 Hire cars 93,600 Accumulated Depreciation - hire cars 39,400 Accounts payable 10,800 Unearned hire fees 2,260 Helena, Capital 68,340 Helena, Drawings 20,600 Hire fees revenue 98,700 Wages expense 50,620 Fuel and oil expense 10,680...

The countries of Utopia and Dystopia can each produce two goods: wine and cars. If Utopia...

The countries of Utopia and Dystopia can each produce two goods: wine and cars. If Utopia produces only wine, it can produce 80 barrels per year; if it produces only cars, it can produce 40 cars per year. If Dystopia produces only wine, it can produce 60 barrels per year; if it produces only cars, it can produce 90 cars per year. Indicate the opportunity cost of producing cars and wine in Utopia and Dystopia by reproducing the table below...

Suppose a country uses Land to produce either wheat or corn. Each unit of Land produces...

Suppose a country uses Land to produce either wheat or corn. Each unit of Land produces either 3 Corn or 4 Wheat. The country has 1200 units of land. a) What is the opportunity cost of corn? b) If the country produces 2400 Wheat, how much Corn can they produce? c) If they increase Corn production by 300 how much will they reduce Wheat production? d) Is the combination 1500 units of Corn and 3200 units of Wheat Efficient, Inefficient...

Using their available amount of resources, USA and Canada can each produce oranges and salmonberries as...

Using their available amount of resources, USA and Canada can each produce oranges and salmonberries as shown in the following table, measured in thousands of bushels (assume these are the only combinations that could be produced). USA Canada oranges salmonberries oranges salmonberries 12 0 6 0 3 3 3 3 0 4 0 6 Which country has the comparative advantage in producing salmonberries? Which one has the comparative advantage in producing oranges? Explain. (1) Suppose that each country is currently...

Subjects