Assume that two countries, Venezuela and Suriname, can produce Bananas or Cars with the

resources available in their countries. The maximum amount of each product produced in each country is provided in the table below.

2. Which country has a should specialize in the production of cars? Which country should

specialize in the production of bananas?

3. Assume that each country specializes production according to their comparative advan-

tage. Let's say that one trade oer leaves Venezuela with 20 Bananas and 20 Cars, while

Suriname gets 20 Bananas and 10 Cars. Would Venezuela agree to this oer? Why or

why not?

4. Assume that each country specializes production according to their comparative advan-

tage. Let's say that another trade oer leaves Venezuela with 30 Bananas. How many

Cars would Venezuela need in order to accept an oer that leaves them with 30 Bananas?

Maximum Amt of Bananas /Maximum Amt of Cars

Venezuela 40 / 35

Suriname 20 / 30

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28 Apr 2018

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Related questions

The following table provides data on the productivity of a single unit of a resource in producing clothing and cars in both Japan and Canada.

	One Unit of Resource Produces either/or but not both
	Clothing (meters)	Cars
Japan	6	2
Canada	2	1

For simplicity, assume that these are the only two countries in the world, the production of each product in each country is subject to constant returns, and each country maintains full employment thanks to costless mobility of resources within the same country. Suppose Canada is endowed with 50 units of this all-purpose resource while Japan is endowed with 20 units. Answer the following questions. Justify your answers.

Suppose that, when trade between the two countries is not permissible, each country allocates half of its resource endowment to the production of one good.

a)If trade between the two countries is permissible. Which country would specialize in the production of clothing? Which country would specialize in the production of cars? Indicate the production points of each country in this case. What is the world total output of each product in this case?

indigoreindeer636

The law of comparative advantage states that:

a. each country should specialize in producing the good with the lowest opportunity cost.

b. a country that is able to produce something using fewer resources than other countries would gain from specialization and trade.

c. international trade barriers slow the introduction of new goods and better technologies.

d. countries can gain from trade if production is subject to economies of scale.

e. countries must agree on how much of one good exchanges for another.

turquoiseferret638

PART B â Questions 10 â 27 Use the following assumptions to answer all questions: â¢ There are three countries â Argentina, Britain and Canada. â¢ Each country produces and consumes two kinds of goods â crude oil and beef. â¢ All countries make their goods from a single type of input â labor â and each country has 700 hours of labor available to produce crude oil and beef. â¢ Each country demands 5 (five) barrels of crude oil. This assumption simply means that a country must have exactly 5 barrels of crude oil â it may produce them domestically, it may import them from abroad, or it makes some domestically and imports the rest. â¢ Countries produce goods using the technology described in the table below Technology Hours of labor needed to produce one unit of good Using the above assumptions, answer the following questions: â¢ Calculate the quantities of crude oil and beef produced in each country in autarky (when they do not trade and each country produces its own crude oil and beef) â¢ Order the countries according to their absolute advantage in production of crude oil â¢ Order the countries according to their absolute advantage in production of beef â¢ Consider the case where countries are free to specialize and trade. In the table below calculate each countryâs opportunity cost of producing one unit of each good. â¢ Calculate the quantities of crude oil and beef produced in each country, consistent with the countryâs comparative advantage. Based on the above calculations, answer questions 10 through 27: Consider autarky, when countries do not trade and each country produces its own crude oil and beef. 10. In autarky, Argentina produces _____ barrels of oil. a. 0 b. 5 c. 10 d. 15 11. In autarky, Britain produces _____ barrels of oil. a. 0 b. 5 c. 10 d. 15 12. In autarky, Canada produces _____ barrels of oil. a. 0 b. 5 c. 10 d. 15 13. In autarky, Argentina produces _____ pounds of beef. a. 0 b. 70 c. 150 d. 400 14. In autarky, Britain produces _____ pounds of beef. a. 0 b. 70 c. 150 d. 400 15. In autarky, Canada produces _____ pounds of beef. a. 0 b. 70 c. 150 d. 400 16. Country of _____ has absolute advantage in production of crude oil. a. Argentina b. Britain c. Canada d. No country 17. Country of _____ has absolute advantage in production of beef. a. Argentina b. Britain c. Canada d. No country Consider effects of specialization, when countries are allowed to trade. 18. When countries specialize, Argentina produces _____ barrels of oil. a. 0 b. 5 c. 10 d. 15 19. When countries specialize, Britain produces _____ barrels of oil. a. 0 b. 5 c. 10 d. 15 20. When countries specialize, Canada produces _____ barrels of oil. a. 0 b. 5 c. 10 d. 15 21. When countries specialize, Argentina produces _____ pounds of beef. a. 0 b. 700 c. 150 d. 400 22. When countries specialize, Britain produces _____ pounds of beef. a. 0 b. 700 c. 150 d. 400 23. When countries specialize, Canada produces ____ pounds of beef. a. 0 b. 700 c. 150 d. 400 24. Country of __C___ has comparative advantage in production of crude oil. a. Argentina b. Britain c. Canada d. No country 25. Country of ___A__ has comparative advantage in production of beef. a. Argentina b. Britain c. Canada d. No country 26. Countries gain from trade because specialization increases ____. a. Trade deficit b. Unemployment c. Efficiency d. Inflation 27. Countries should trade with trading partners that _____. a. Are equally technologically advanced b. Use superior technology in every industry c. Use less advanced technology in every industry d. Use different technologies, because trade benefits all