Solutions to Section 1 Problems 37 b Similar to the answer to part a if the

Solutions to section 1 problems 37 b similar to the

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Solutions to Section 1 Problems 37 b.Similar to the answer to part a, if the McCoys (compared to the Hatfields) are better at raising chickens and the Hatfields (compared to the McCoys) are better at growing corn, then there will be gains from specialization and trade. 13. a.Since countries gain from specializing in production of the goods and services in which they have a comparative advantage, the United States must have the comparative advantage in aircraft production, and China must have the comparative advantage in production of trousers, slacks, and jeans. b.Since trade has nothing to do with absolute advantage, we cannot determine from this data which country has an absolute advantage in either of these goods. 14. a.Peter Pundit is not correct. He confuses absolute and comparative advantage. Even if the EU had an absolute advantage over the United States in every product it produced, the United States would still have a comparative advantage in some products. And the United States should continue to produce those products: trade will make both the EU and the United States better off. b. You should expect to see the EU export those goods in which it has the comparative advantage and the United States export those goods in which it has the comparative advantage.
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