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Chapter 19: Q3 (page 461)

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?

Short Answer

Expert verified

France has absolute advantage in producing both sweater and wine.

Step by step solution

01

Absolute Advantage Definition

Absolute Advantage means that : a country can produce more output of a good - per unit input, compared to other country.

02

Production Possibilities Concept  

Labour hours needed to produce per unit sweater & wine in France & Tunisia.


Labour : SweaterLabour : Wine
France11
Tunisia23
03

Solution Explanation

France has absolute advantage in producing sweaters, as it can produce a unit sweater with lesser labour hours (1 hour) than Tunisia (2 hours) .

France has absolute advantage in producing in producing wine, as it can produce a unit wine with lesser labour hours (1 hour) than Tunisia (3 hours).

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Most popular questions from this chapter

Why does the United States not have an absolute

advantage in coffee?

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

What is absolute advantage? What is comparative advantage?

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?

Table 19.15 shows how the average costs of production for semiconductors (the “chips” in computer memories) change as the quantity of semiconductors built at that factory increases.

a. Based on these data, sketch a curve with quantity produced on the horizontal axis and average cost of production on the vertical axis. How does the curve illustrate economies of scale?

b. If the equilibrium quantity of semiconductors demanded is 90,000, can this economy take full advantage of economies of scale? What about if quantity demanded is 70,000 semiconductors 50,000 semiconductors? 30,000 semiconductors?

c. Explain how international trade could make it possible for even a small economy to take full advantage of economies of scale, while also benefiting from competition and the variety offered by several producers.
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