Ch 5 Global Trade [AP & Reg]

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Unformatted text preview: /constant) opportunity costs. “Export” what it can produce at a lower relative price and “import” goods it can buy at a lower relative price. produce lower buy lower Abs o lute Advantag e - more efficient, can produce more with the same number of inputs [who can produce absolutely more] “Do what you do best & trade for the rest.” The c o untrie s o f: The “Fuzzy” and “Wuzzy” a nd “Wuzzy” Fuzzy A B C C E F DCC: Fuzzy Wuzzy A B C B E F DCC: Wuzzy D D Fuzzy 900 Plums 1500 1200 900 600 300 0 1G = __ P Plums 3500 2500 1500 1000 500 0 1G = __ P 3 1G 3500 2500 150 200 Grapes 0 100 200 300 400 500 __ G= 1P Grapes 0 150 300 450 575 700__ G = 1P 150 1/3 500 1/3 Before: Before: 900 plums 900 2500 plums 2500 3400 plums 3400 After: 3500 plums 3500 3500 – 3400 = 100 plums 100 Terms of Trade 4 1 Grape = __ Plums 1/5 1/5 5 1P 1P Before: Before: 200 grapes 200 150 grapes 150 350 grapes 350 After: 500 grapes 500 500 – 350 = 150 grapes 500 150 11. In Wuzzy, the opportunity cost of 1 grape is (1/2/3/4/5) plums. Wuzzy opportunity 12. Fuzzy has a comparative advantage in & should produce (plums/grapes). comparative 13. The terms of trade will be 1 grape for somewhere b...
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