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Chapter 32: Q. 32.1LO (page 710)

Explain why nations can gain from specializing in production and engaging in international trade

Short Answer

Expert verified

Getting and nurturing your optimal overseas consumer market might cost thousands of dollars.

Step by step solution

01

Introduction

There would be numerous costs while doing business overseas for are not only about taking quick sales. It's analogous to flirting. It is easy enough to find any date anymore, but meet this special anyone and deciding if you really are tall suited takes more money. The same must be said this for selling.

02

Given Information

This should need assessing is not whether your business is deeply committed on accessing international market.

03

Explanation

It could do that in a given direction. Expenditure towards management but also defense will have to be enhanced. More various payment options may be needed by sellers. Your business might well have arranged periodic visits to maintain up healthy, based on the industry and culture. Whatever requirement, the extra effort and cost will complement the commitment necessary for protracted progress

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Most popular questions from this chapter

Consider the data in Table 32-1. Would U.S. residents gain from the trade of U.S. tablets for Indian apps if the rate of exchange of tablet devices for digital apps happened to be 3 tablets per app?

Based on your answers to Problem 32-4, which nation has a comparative advantage in producing digital TVs? Which nation has a comparative advantage in producing bottles of wine?

Suppose that the two nations in Problem 32-4 decide to specialize in producing the good for which they have a comparative advantage and to engage in trade. Would residents of both nations find a rate of exchange of 4 bottles of wine for 1 digital TV potentially agreeable? Why or why not?

To answer Problems 32-7 and 32-8, refer to the following table, which shows possible combinations of hourly outputs of modems and flash memory drives in South Shore and neighboring East Isle, in which opportunity costs of producing both products are constant.

Refer to your answers to Problem 32-7when answering the following questions.

a. Which one of the following rates of exchange of modems for flash memory drives will be acceptable to both nations: (i) 3modems for 1flesh drive; (ii) 1modem for 1flash drive; or (iii) 1flash drive for 2.5modems? Explain.

b. Suppose that each nation decides to use all available resources to produce only the good for which it has a comparative advantage and to engage in trade at the single feasible rate of exchange you identified in part (a). Prior to specialization and trade, residents of South Shore chose to produce and consume 30modems per hour and 90flash drives per hour, and residents of East Isle chose to produce and consume 40modems per hour and 30flash drives per hour. Now, residents of South Shore agree to export to Fast Isle the same quantity of South Shore's specialty good that Fast Isle residents were consuming prior to engaging in international trade. How many units of East Isle's specialty good does South Shore import from East Isle?

c. What is South Shore's hourly consumption of modems and flash drives after the nation specializes and trades with East Isle? What is East Isles hourly consumption of modems and flash drives after the nation specializes and trades with South Shore?

d. What consumption gains from trade are experienced by South Shore and East Isle?

Suppose that the two nations in Problems 32-1and 32-2choose to specialize in producing the goods for which they have a comparative advantage. They agree to trade at a rate of exchange of 1pastry for 1 sandwich. At this rate of exchange, what are the maximum possible numbers of pastries and sandwiches that they could agree to trade?
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