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slavikrds [6]
3 years ago
6

Consider two neighboring island countries called Felicidad and Arcadia. They each have 4 million labor hours available per week

that they can use to produce rye, jeans, or a combination of both. The following table shows the amount of rye or jeans that can be produced using 1 hour of labor.
Country Rye Jeans
(Bushels per hour of labor) (Pairs per hour of labor)
Felicidad 4 16
Arcadia 5 10

Initially, suppose Arcadia uses 1 million hours of labor per week to produce rye and 3 million hours per week to produce jeans while Felicidad uses 3 million hours of labor per week to produce rye and 1 million hours per week to produce jeans. Consequently, Felicidad produces 12 million bushels of rye and 16 million pairs of jeans, and Arcadia produces 5 million bushels of rye and 30 million pairs of jeans. Assume there are no other countries willing to trade goods, so, in the absence of trade between these two countries, each country consumes the amount of rye and jeans it produces.

Felicidad's opportunity cost of producing 1 bushel of rye is ________ of jeans, and Arcadia's opportunity cost of producing 1 bushel of rye is ________ of jeans. Therefore, ________ has a comparative advantage in the production of rye, and ________ has a comparative advantage in the production of jeans.

Suppose that each country completely specializes in the production of the good in which it has a comparative advantage, producing only that good. In this case, the country that produces rye will produce ________ million bushels per MONTH, and the country that produces jeans will produce ________ million pairs per MONTH.
Business
1 answer:
Rufina [12.5K]3 years ago
8 0

Answer:

<u>Felicidad: </u>each bushel of rye cost 4 pairs of jeans

<u>Arcadia: </u>each bushel of rye cost 2 pair of jeans

As in comparison it takes less pair of the jean to produce a bushel of rye Arcadia has a comparative advantage in the production of rye

while Felicidad has it in the production of jeans.

<em>Specialized economy:</em>

Felicidad 16,000,000 pairs of jean

Arcadia 20,000,000 bushels of rye

Explanation:

The opportunity cost is the number of goods not produced as a result of the production choice.

For the bushel of rye, it will be the pairs of jeans.

<em><u>For  Felicidad Island will be:</u></em>

16 jeans / 4 bushel of rye = 4 jeans

each bushel of rye cost 4 pairs of jeans

<em><u>For Arcadia Island will be:</u></em>

10 pair of jeans / 5 bushels of rye = 2 jeans

each bushel of rye cost 2 pair of jeans

<em><u>If they specialize </u></em>

Felicidad 4 millions labor hours x 4 pairs per hour = 16,000,000 jeans

Arcadia 4 millions labor hours x 5 bushel per hour = 20,000,000 bushel

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Answer:

Ten pounds of chicken to trade for at least <u>40</u> pounds of vegetables but not more than<u> 50</u> pounds of vegetables

Explanation:

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John             40                     10                4:1 (40/10) or 1:0.25 (10/40)

George          25                      5                 5:1 (25/5) or 1:0.20 (5/25)

John has comparative advantage in Chicken and George has comparative advantage in Veggies because :

  • John's chicken opportunity cost, in veggies < George (4<5). George's veggies opportunity cost, in chicken < John (0.20<0.25).
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So,  John will sell Chicken to George & George will sell veggies to John. Gains from trade are when each get trade ratio better than their their own trade off ratio.

  • It implies: John gets >' 4 pounds veggies per chicken pound' and George gets > '0.20 pound chicken per veggie pound'.
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. Consider an economy that produces only chocolate bars. In year 1, the quantity produced is 4 bars and the price is $4. In year
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Answer:

Nominal GDP in year 1 = $16

Nominal GDP in year 2 = $25

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Explanation:

Gross domestic product is the total sum of final goods and services produced in an economy within a given period which is usually a year

GDP calculated using the expenditure approach = Consumption spending by households + Investment spending by businesses + Government spending + Net export

Net export = exports – imports

Nominal GDP is GDP calculated using current year prices

Nominal GDP in year 1 = 4 x $4 = $16

Nominal GDP in year 2 = 5 x $5 = $25

Nominal GDP in year 3 = 6 x $6 = $36

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Whenever there is maximization of total surplus that is been received by those that are part of society by market allocation of resources then there is market Efficiency.

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Therefore, When there is  an economy efficiency,  there would be maximization of total surplus.

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Answer:

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There is a migration from a world where national economies were once self-contained entities, separated and isolated from each other due to some barriers like time zones, distance, government regulations, investments, language and business systems.

During the 1960s, there were four stylized facts that described the demographics of the global economy.

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Shifts in the world economy can be spotted in the shifts in multinational enterprises.

Two major trends are found in the demographics of the multinational enterprises.

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Secondly, is the emergence of small and medium-sized multinationals.

These shifts are seen in the fall of the Communist in Eastern Europe and the republic of the former Soviet Union.

The implications of these trends are similar to U.S and Britain. These had been the big players in the international scene. But that has changed. To win orders, the U.S and Britain have to compete with competitors around the world.

There is great opportunities for companies in Hong Kong to seriously pursue export market due to the decline in the influence of the U.S and Britain in the world economy.

We can say that we are moving to a world where barriers to cross-border trade and investments are declining, perceived distances are being eliminated due to the advances in transportation and technology and national economies are merging into interdependent, integrated global economic system.

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