Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 19: Q 16. (page 462)

Are the gains from international trade more likely

to be relatively more important to large or small

countries?

Short Answer

Expert verified

Trade gains are relatively more important to small countries.

Step by step solution

01

Step 1. Definition

The exchange of capital, goods, and services across international borders or territories is referred to international trade.

02

Step 2. Explanation

Gains from international trade are more likely to be relatively more important to small countries. This is because small countries are not self-reliant and they have minimum room for specialization and fewer economies of scale. As large countries have large internal markets that’s why they have room for more specialization and have greater economies of scale but small countries don’t have this.

In smaller countries, there are no big internal markets and limited firms producing specialized products so smaller countries have no comparative advantage over bigger countries.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Look at Table 19.9. Is there a range of trades for

which there will be no gains?

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?

If the removal of trade barriers is so beneficial to international economic growth, why would a nation continue to restrict trade on some imported or exported products?

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?

Do consumers benefit from intra-industry trade?
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free