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Chapter 33: Q. 17. (page 804)

Are differences in geography behind the differences in absolute advantages?

Short Answer

Expert verified

Geography plays a most vital role in causing differences in absolute advantages.

Step by step solution

01

Step 1. Meaning of absolute advantage.

It is the ability of a party or individual, or firms, or country to produce a good or services more efficiently than its competitors.

02

Step 2. Role of geography in causing differences in absolute advantages.

Yes, geography does sometimes play a role in causing differences in absolute advantages. Absolute advantage in a term used when any country, in order to produce a good or services, makes use of fewer resources as compared to other countries. Thus, to a certain extent, greater natural resources or access to the seas can lead to absolute advantage for certain goods.

03

Step 3. Examples.

a) The United states has some of the richest farmland in the world, making it easier to grow corn and wheat.

b) Guatemala and Colombia have climates especially suited for growing coffee.

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Most popular questions from this chapter

Are differences in geography behind the differences in absolute advantages?

What is splitting up the value chain?

France and Tunisia both have Mediterranean climates that are excellent for producing/harvesting green beans and tomatoes. In France it takes two hours for each worker to harvest green beans and two hours to harvest a tomato. Tunisian workers need only one hour to harvest the tomatoes but four hours to harvest green beans. Assume there are only two workers, one in each country, and each works 40 hours a week.

a. Draw a production possibilities frontier for each country. Hint: Remember the production possibility frontier is the maximum that all workers can produce at a unit of time which, in this problem, is a week.

b. Identify which country has the absolute advantage in green beans and which country has the absolute advantage in tomatoes.

c. Identify which country has the comparative advantage.

d. How much would France have to give up in terms of tomatoes to gain from trade? How much would it have to give up in terms of green beans?

In World Trade Organization meetings, what do you think low-income countries lobby for?

In France it takes one worker to produce one sweater, and one worker to produce one bottle of wine. In Tunisia it takes two workers to produce one sweater, and three workers to produce one bottle of wine. Who has the absolute advantage in production of sweaters? Who has the absolute advantage in the production of wine? How can you tell?
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