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Chapter 20: Q. 5 (page 493)

How can there be any economic gains for a country from both importing and exporting the same good, like cars?

Short Answer

Expert verified

Yes, there can be economic gains for a country from both importing and exporting the same good which is referred to as intra-industry trade.

Step by step solution

01

Step 1. Meaning of Economic Gains.

When revenue is higher than costs in an economy it is called economic gains.

02

Step 2. Is there economic gains?

Yes, there can be economic gains for a country from both importing and exporting the same good which is referred to as intra-industry trade. Intra-industry trade allows international trade in the same industry which is beneficial in the long run as it is trading in the goods of its specialization which results in efficient production of the goods.

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Most popular questions from this chapter

If trade increases world GDP by 1% per year,

what is the global impact of this increase over 10 years? How does this increase compare to the annual GDP of a country like Sri Lanka? Discuss. Hint: To answer this question, here are steps you may want to consider. Go to the World Development Indicators (online) published by

the World Bank. Find the current level of World GDP in constant international dollars. Also, find the GDP of Sri Lanka in constant international dollars. Once you have these two numbers, compute the amount of the additional increase in global incomes due to trade and compare that number to Sri Lanka’s GDP.

In Exercise 20.31, is there an “ask” where Venezuelans may say “no thank you” to trading with Canada?

In Japan, one worker can make 5 tons of rubber or

80 radios. In Malaysia, one worker can make 10 tons of rubber or 40 radios.

a. Who has the absolute advantage in the production of rubber or radios? How can you tell?

b. Calculate the opportunity cost of producing 80

additional radios in Japan and in Malaysia. (Your calculation may involve fractions, which is fine.)

Which country has a comparative advantage in

the production of radios?

c. Calculate the opportunity cost of producing 10

additional tons of rubber in Japan and in Malaysia. Which country has a comparative advantage in producing rubber?

d. In this example, does each country have an absolute advantage and a comparative advantage

in the same good?

e. In what product should Japan specialize? In what

product should Malaysia specialize?

Why does the United States not have an absolute advantage in coffee?

Can a nation’s comparative advantage change over

time? What factors would make it change?
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