Chapter 33: Q.5 (page 803)
How can there be any economic gains for a country from both importing and exporting the same good, like cars?
Short Answer
Gains from splitting up the value chain, high degree of specialization, and economies of scale.
Chapter 33: Q.5 (page 803)
How can there be any economic gains for a country from both importing and exporting the same good, like cars?
Gains from splitting up the value chain, high degree of specialization, and economies of scale.
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Get started for freeYou just got a job in Washington, D.C. You move into an apartment with some acquaintances. All your roommates, however, are slackers and do not clean up after themselves. You, on the other hand, can clean faster than each of them. You determine that you are 70% faster at dishes and 10% faster with vacuuming. All of these tasks have to be done daily. Which jobs should you assign to your roommates to get the most free time overall? Assume you have the same number of hours to devote to cleaning. Now, since you are faster, you seem to get done quicker than your roommate. What sorts of problems may this create? Can you imagine a trade-related analogy to this problem?
How does comparative advantage lead to gains from trade?
Does intra-industry trade contradict the theory of comparative advantage?
From earlier chapters you will recall that technological change shifts the average cost curves. Draw a graph showing how technological change could influence intra-industry trade.
What is splitting up the value chain?
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