Ch 5 Global Trade [AP & Reg]

Whydoesrabbithavean absoluteadvantageinguns

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Unformatted text preview: tage in the production of both goods. e. Neither country has a comparative advantage in the production of either good. Answer: For Econ, 1 cocoa costs 2 cars = so, 1/2 cocoa costs 1 car = For Nomics, 1 cocoa so, 1/5 cocoa costs = costs = 5 cars 1 car Econ has a lower op cost for cocoa, Econ 2 cars v. 5 cars. So Econ will produce cocoa. So Nomics has a lower op cost for cars, Nomics 1/5 cocoa v. 1/2 cocoa. So Nomics will produce cars. So 3. The diagram shows the PPCs for two countries: Artland and Rayland. Using equal amounts of resources, Artland can produce 600 hats or 300 bicycles, whereas Rayland can produce 1,200 hats or 300 bicycles. (a)Calculate the opportunity cost of a bicycle in Artland. Answer to 3. (a): Answer The Domestic Comparative (opportunity cost) of a bicycle in Artland is 2 units of hats. [1 bicycle = 2 hats or 600/300=2] (b) If the two countries specialize and trade, which country will import bicycles? Explain. Answer to 3. (b): Answer Rayland will import bicycles. Domestically, they have to give Rayland up 4 hats to get a bicycle but with trade they ha...
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This note was uploaded on 07/20/2012 for the course ECON 2106 at GCSU.

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