Economics > QUESTIONS & ANSWERS > ECON 1301 Answer_Key_Macro_Topic_1.3A-_Comparative_Advantage_and_Trade-2 AP Macro Topic 1.3 Comparat (All)

ECON 1301 Answer_Key_Macro_Topic_1.3A-_Comparative_Advantage_and_Trade-2 AP Macro Topic 1.3 Comparative Advantage and Trade.

Document Content and Description Below

1. Identify which country has the absolute advantage in chips. ​Luxland 2. Identify which country has the absolute advantage in pretzels. ​Luxland 3. Calculate the opportunity cost of producin... g one chip in Luxland. ​1 pretzel 4. Calculate the opportunity cost of producing one pretzel in Leanderland. ​½ chip 5. Identify which country has the comparative advantage in pretzels. ​Leanderland 6. Identify which country has the comparative advantage in chips. ​Luxland 7. If the two countries specialize and trade, which country will import chips? Explain. ​Leanderland will import chips. Leanderland has a comparative advantage in pretzels so they will produce pretzels and import chips 8. If the terms of trade are 4 chips for 1 pretzel, would trade be advantageous for Luxland? Explain No, Luxland could make 1 pretzel for a cost of 1 chip. For Luxland, trading 1 pretzel for 4 chips is more expensive than just producing 1 pretzel on their own. 9. If the terms of trade are 4 chips for 1 pretzel, would trade be advantageous for Leanderland? Explain. ​Yes, if Leanderland produces 1 chip on their own it will cost them 2 pretzels, but if they trade they can get 1 chip for only ¼ a pretzel. They would be gaining more than if they produced chips themselves. 10. Assume that Luxland and Leanderland specialize and trade in a way that is advantageous for both of them. Explain what will happen to the number of pretzels that Leanderland can produce. ​The amount of pretzels that Leanderland can produce would stay the same. Specialization and trade doesn’t change the amount that either country CAN produce. Specialization means that Leanderland would make only pretzels and Luzland would make only chips, then they would trade. Part 2: Stretch Your Thinking- ​Answer the following questions assuming that advancements in technology cause Leanderland to double the amount of chips and pretzels they can produce. 11. Which country has the comparative advantage in the production of chips? Explain. ​Luxland still has comparative advantage in chips. Despite doubling production of both products, Leanderland’s PER UNIT opportunity cost of each product remains the same. 12. Identify a terms of trade that would be advantageous for both countries. ​1 chip for 1.5 pretzel OR 1 pretzel for ¾ of a chip (other possible answers) [Show More]

Last updated: 1 year ago

Preview 1 out of 4 pages

Add to cart

Instant download

We Accept:

We Accept
document-preview

Buy this document to get the full access instantly

Instant Download Access after purchase

Add to cart

Instant download

We Accept:

We Accept

Reviews( 0 )

$8.00

Add to cart

We Accept:

We Accept

Instant download

Can't find what you want? Try our AI powered Search

OR

REQUEST DOCUMENT
1855
0

Document information


Connected school, study & course


About the document


Uploaded On

Aug 26, 2021

Number of pages

4

Written in

Seller


seller-icon
Hilda

Member since 3 years

16 Documents Sold


Additional information

This document has been written for:

Uploaded

Aug 26, 2021

Downloads

 0

Views

 1855

Document Keyword Tags

What is Browsegrades

In Browsegrades, a student can earn by offering help to other student. Students can help other students with materials by upploading their notes and earn money.

We are here to help

We're available through e-mail, Twitter, Facebook, and live chat.
 FAQ
 Questions? Leave a message!

Follow us on
 Twitter

Copyright © Browsegrades · High quality services·