Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 19: Q 21. (page 462)

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

which there will be no gains?

Short Answer

Expert verified

Both Mexico and the US have to decide between shoes and refrigerators.

Step by step solution

01

Step 1. Definition

The ability to produce a good or service at a lower opprtunity cost than others is referred to as comaprative advantage. Those who enjoy a comaprative advantage in the production of a good or service can specialize in that good.

02

Step 2. Explanation

See from the table it is known that the USA has a comparative advantage in refrigerators and Mexico has a comparative advantage in shoe production.

So, if Mexico has to be done a profitable trade, they have to export shoes more than 4000 and need to import more than 5000 refrigerators to balance the trade.

And the USA must export more than 20000 refrigerators and need to import more than 5000 shoes to be on the side of beneficial trade.

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

True or False: The source of comparative advantage must be natural elements like climate and mineral deposits. Explain.

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?

What is intra-industry trade?

In World Trade Organization meetings, what do

you think low-income countries lobby for?

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 the additional increase in global incomes due to trade and compare that number to Sri Lanka’s GDP.
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