Specialization in international trade- based on Ricardoâs Theory:
Given that two nations have equal resources and both nations agree to specialize in the production of a product that is most efficient, determine:
a)Specialization between the two nations (which nation specializes in which product?)
b)The range of terms of trade (trade negotiation terms)
c)The best of terms of trade (democratic distribution of trade benefit)
d)The net benefit for each country (after specialization)
e)Discuss the limitations of production and export based on such assumption in the current global economy
Use the following data to answer the above questions.
Before specialization
Products/Country
Japan
US
Auto
10
20
Plane
5
20
Specialization in international trade- based on Ricardoâs Theory:
Given that two nations have equal resources and both nations agree to specialize in the production of a product that is most efficient, determine:
a)Specialization between the two nations (which nation specializes in which product?)
b)The range of terms of trade (trade negotiation terms)
c)The best of terms of trade (democratic distribution of trade benefit)
d)The net benefit for each country (after specialization)
e)Discuss the limitations of production and export based on such assumption in the current global economy
Use the following data to answer the above questions.
Before specialization
| Products/Country | Japan | US |
| Auto | 10 | 20 |
| Plane | 5 | 20 |
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Related questions
TITLE: BENEFITS OF TRADE Trade among nations has been growing faster than the total world GDP. The growth of U.S. exports and imports relative to the U.S. GDP parallels this global trend. Today, exports constitute more than 10 per cent of total national production. In some countries, trade accounts for a much higher share of total economic activity.
Tasks: Consider the table below for the neighbouring nations of Northland and West Coast. The table lists the maximum feasible hourly rates of the production of pastries if no sandwiches are produced and the maximum feasible hourly rates of the production of sandwiches if no pastries are produced. Assume that the opportunity costs of producing these goods are constant in both nations.
| Product | Northland | West Coast |
|---|---|---|
| Pastries (per hour) | 50,000 | 100,000 |
| Sandwiches (per hour) | 25,000 | 200,000 |
a. Based on the data provided, what is the opportunity cost of producing pastries and sandwiches in Northland?
b. What is the opportunity cost of producing pastries and sandwiches in West Coast?
c. Which nation has a comparative advantage in producing pastries and which nation has a comparative advantage in producing sandwiches?
d. Suppose the two nations choose to specialize in producing the goods for which both have a comparative advantage. Both agree to trade at a rate of exchange of one pastry for one sandwich. At this rate of exchange, what are the maximum numbers of pastries and sandwiches that both could agree to trade?
