Mankiw the principles of Economics (fifth edition) exercises answer chapter III interdependence and the benefits of trade

1. Under what circumstances is the production possibility curve a straight line rather than an outer convex one?
A: The production possibility curve will be different shape due to the dynamic change of opportunity cost. In the case of constant opportunity cost, the production possibility curve is a straight line; When the opportunity cost increases, the production possibility curve is concave to the origin, while the opportunity cost decreases, the production possibility curve is convex to the origin point. These are shown in the following cases.

2. Explain the difference between absolute and comparative advantage.
A: The same producer may have an absolute advantage over both items, but it is not possible to have a comparative advantage on both items at the same time. The absolute advantage reflects the high and low productivity, the comparative advantage reflects the relative opportunity cost.
3. Give an example of a person who has an absolute advantage in doing something, while another has a comparative advantage.
A: The champ Ali is more efficient than the neighbor's lad, whether it's boxing or cleaning up the trash in front of his own door. Ali will get $50,000 for half an hour, and he can clean up the rubbish in half an hour. It takes 1 hours for Mike to clean up Ali's garbage, and he can go out and earn $10 in the same time. As you can see, Ali has an absolute advantage in both things. But Mike's chance to clean up the trash is $10, and Ali's opportunity cost is $50,000. As a result, Mike has a comparative advantage in cleaning up rubbish.

4. Is the absolute advantage important or the comparative advantage important for trade? Take your answer to the last question as an example to explain your reasoning.
A: For trade, comparative advantage is important. From the example of the second question, each person engaged in their own comparative advantage of things, while exchanging goods or services, can make everyone to achieve better economic status. In the example above, Ali should not clean up the rubbish, but should go to the boxing match. He should hire Mike to clean up the rubbish. As long as he pays Mike $10 less than $50,000, the situation will be better for both sides.

4. Does a country tend to export or import items that have a comparative advantage? explain why.
A: A country tends to export its own products with comparative advantages and imports its own inferior products. Because the opportunity cost of producing the product with comparative advantage is small. According to the principle of comparative advantage, both sides of trade produce their own products with comparative advantage and export, both of which can be consumed to the product combination outside the boundary curve of production possibility, so that the benefits of both countries will increase.

5. Why do economists oppose the policy of restricting trade between countries?
A: Because each country will have a comparative advantage in the production of different services or goods. Countries in the production of division of labor, specializing in the production of their own comparative advantage of products, can make the world's economic output increased, while trade with each other, consumers in every country can consume more goods and services, all countries can achieve greater prosperity.

Problems and Applications
Maria can read 20 pages of economics every hour, or 1 hours to read 50 pages of sociological writings. She studies 5 hours a day.
1. Maria
A. Draw the boundaries of Maria's production possibilities for reading economics and sociological writings.
For:

What is the opportunity cost for Maria to read a 100-page sociological book?
B. Maria
A: Maria reads 100 pages of sociological work for 2 hours, and 1 hours to read 20 pages of economics, so she can read 2 pages of economics in 40 hours. She read 100 pages of the opportunity cost of sociological writings to read 40 pages of the economics book.

2. American and Japanese workers can produce 4 cars per year. An American worker can produce 10 tonnes of food a year. and a Japanese worker
It can produce 5 tons of grain per year. For the sake of simplification, assume that there are 100 million workers in each country.
A. Based on this situation, a table similar to the one in Figure 3-1 (a) of the (textbook) is made.
For:
Grain Auto Grain Automobile
United States 1/10 1/4 10 4
Japan 1/5 1/4 5 4

B. Draw the boundaries of the production possibilities of the American and Japanese economies.
For:

C. For the United States, what is the opportunity cost of producing a car? What is the opportunity cost for Japan to produce a car? Fill this information in a table similar to (textbook) Table 3-11.
A: For the United States, the opportunity cost of 1 cars is 2.5 tonnes of food, and 1 tonnes of food is 0.4 vehicles. For Japan, the opportunity cost of 1 cars is 1.25 tonnes of food, and 1 tonnes of food is 0.8 vehicles. As shown in table 3-2.
Table 3-2 opportunity costs for automobiles and foodstuffs
Opportunity cost of 1 units (ton)
Car (according to the given food)
(ton) Grain (according to the abandoned car)
Car
United States 2.5 0.4
Japan 1.25 0.8

D. Which country has an absolute advantage in producing automobiles? In the production of food?
A: The United States occupies an absolute advantage in producing food. The absolute ability of the U.S. and Japan to produce cars is the same.
E. Which country has a comparative advantage in producing automobiles?? In the production of food??
A: The United States has a comparative advantage in producing food, and Japan has a comparative advantage in producing automobiles.
F. When there is no trade, half of the workers in each country produce cars and half of them produce food. How many cars and food can each country produce?
A: The United States can produce 500 million tons of grain and 200 million cars in 1 years, and Japan can produce 250 million tonnes of grain and 200 million cars in 1 years.
G. In the absence of trade, examples show that trade can make the situation of each country better.
A: In the absence of trade, the United States and Japan can spend 750 million tonnes of grain (5+ 2.5) and 400 million cars (1) in total over a period of up to five years. If the United States and
Japanese Division of Labor, the division of its ability. The United States specializes in producing it has a comparative advantage of food, 1 years can produce 1 billion tons; Japan specializes in the production of its comparative advantage of the steam
Car, 1 years can produce 400 million vehicles. The two countries can enjoy 1 billion tons of food and 400 million cars a year, compared with no division of labor.
and trade with more than 250 million tonnes of grain (10-7.5). As a result, trade has made the situation in two countries even better.
Pat and Kris are roommates. They spend most of their time learning (for granted), but also set aside some time to do their favorite activities: doing
3. Pat
It takes 4 hours for Pat to make a 1-gallon refreshing drink and 2 hours to make 1 pizzas. Kris
Kris making 1 gallons of cool
Pizza and make a refreshing drink. Pat
The drink takes 6 hours, and it takes 4 hours to make 1 pieces of pizza.
A. What is the opportunity cost for each roommate to make 1 pieces of pizza? Who has an absolute advantage in making pizzas? who has a comparative advantage in making pizzas?
A: Pat's chance to make 1 pizzas is 1/2 gallons of cool drink. Kris the opportunity cost of making 1 pizzas is 2/3 gallons of cool
Drink. Pat has both an absolute advantage and a comparative advantage in making pizzas.
B. If Pat and Kris exchange food with each other, who will exchange pizza for a cool drink?
A: Pat will change the pizza for a refreshing drink.
C. The price of pizza can be expressed in a number of gallons of cool drinks. The highest price for a pizza deal that makes two roommates better.
What is the minimum price? explain why.
A: The maximum price for a 1-piece pizza is 2/3 gallons of cool drink, and the lowest price is 1/2 gallons of refreshing drink. Because Pat is on the pizza.
Comparative advantage, and the opportunity cost is 1/2 gallons of cool drinks. If two roommates trade between them, he would choose to produce pizza, and with Kerry
The exchange of cool drinks. If 1 pizzas were exchanged for less than 1/2 gallons of cool drinks, Pat would rather produce 1 pizzas rather than produce 1.
/2 gallons of refreshing beverages. Chris has a comparative advantage in producing cool drinks, and the opportunity cost is 3/2 pieces of pizza. In trade, he would choose to live
produce a refreshing drink and exchange pizza with Pat. For Chris, a minimum of 1 gallons of cool drinks is 3/2 pizzas, which means that 1 bucks
The highest price for the pizza is 2/3 gallons of cool drinks. If 1 pizzas cost more than 2/3 gallons of cool drinks, Chris ' 1 gallons of cool drink
10 of the material will not be changed to 3/2 pieces of pizza. He would rather produce 1 gallons of drinks and produce 3/2 pieces of pizza by himself.
4. Assume that there are 1 0 workers in Canada, and that each worker can produce 2 cars or 30 bushels of wheat for 1 years.
A. What is the opportunity cost of producing 1 cars in Canada? What is the opportunity cost of producing 1 bushels of wheat in Canada? Explain the two kinds of things
The relationship between opportunity costs.
A: the opportunity cost of producing 1 cars in Canada is 15 bushels of wheat. The opportunity cost of producing 1 bushels of wheat is 1/15 cars. This
The reciprocal relationship between the opportunity cost of the two items.
B. Draw the boundaries of Canada's production possibilities. If Canada chooses to spend 1 0 cars, how much wheat can it consume without trade?
Mark this on the production possibility boundary.
Figure 3-3 Canada's production possibilities border
A: In the absence of trade, Canada can consume 15 0 bushels of wheat. When there is trade, Canada can consume 1 0 cars and 20 000
Million-bushel wheat.
C. Now it is assumed that the United States buys 1 0 cars from Canada and each car exchanges 20 bushels of wheat. If Canada continues to spend 1 00
0000
Million cars, how much wheat can this deal make Canada consume? Mark this on your chart. Should Canada accept the deal??
A: This transaction allows Canada to consume 20 0 bushels of wheat (20x1 000). Canada should accept the deal because it makes the
The total amount of items to be consumed has increased.
5. Both England and Scotland produce scones and sweaters. Suppose an English worker can produce 50 scones or 1 sweaters per hour. Suppose a
A Scottish worker can produce 40 scones or 2 sweaters per hour.
A. In the production of each item, which country has an absolute advantage? which State has a comparative advantage?
A: English workers have an absolute advantage in making scones, and Scottish workers have an absolute advantage in making sweaters. 1 English workers produce 1
The opportunity cost for scones is 1/50 sweaters, and the opportunity cost of producing 1 sweaters is 50 scones. 1 Scottish workers have the opportunity to produce 1 scones
The cost is 1/20 pieces of sweater, the opportunity cost of producing 1 sweaters is 20 scones. It can be seen that England workers have a comparative advantage in producing scones, Sue
The people in the orchid have a comparative advantage in the production of sweaters.
B. If England and Scotland decide to trade, what kind of commodity will Scotland use to trade with England? explain why.
A: The Scots will use sweaters to trade with the English people. Because they have a comparative advantage in producing sweaters.
C. If a Scottish worker can only produce one sweater per hour, can Scotland still benefit from trade? England can still be
Do you get the benefit from the easy? explain why.
A: If 1 Scots can only produce 1 sweaters per hour, then the opportunity cost for them to produce 1 sweaters is 40 scones, still below
The opportunity cost for the English people to produce 1 sweaters (50 scones). So the Scots still have a comparative advantage in making sweaters. And at this point, a sugar
The opportunity cost for the orchid to produce 1 scones is the l/40 sweater, which is still higher than the opportunity cost of 1 English people to produce 1 scones, that is, the English born
There is still a comparative advantage in baking cakes. In trade, then, the Scots and the English can still benefit.
6. The following table describes the production possibilities of the two cities in the Baseballia country:
Boston
The amount of red-mended socks a worker produces per hour. The amount of white socks a worker produces per hour
3 3
Chicago
2
1
A. What is the price of a pair of white socks in Boston (indicated in red socks) when there is no trade? What's the price of 1 pairs of white socks in Chicago?
A: No trade, Boston 1 pairs of white socks price is 1 pairs of red socks, Chicago 1 pairs of white socks price is 2 pairs of red socks.
B. In the production of socks for each color, which city has an absolute advantage? which city has a comparative advantage??
A: Boston has an absolute advantage in producing red and white socks. Boston has a comparative advantage in producing white socks, and Chicago is producing red socks.
Have a comparative advantage.
C. If the two cities deal with each other, which color socks will be exported to two cities separately?
A: If they trade with each other, Boston will export white socks, while Chicago exports red socks.
?
D. What is the price range that can be traded?
11 A: The highest price for white socks is 2 pairs of red socks, the lowest price is 1 pairs of red socks. The highest price for red socks is 1 pairs of white socks, the lowest price
It's 1/2 pairs of white socks.
7. Suppose that an American worker can produce 100 shirts or 20 computers a year, and a Chinese worker can produce 100 shirts or 10 units per year.
Computer.
A. Draw the boundaries of the production possibilities of the two countries. Assuming there is no trade, workers in each country produce two of items in half the time,
Mark this out on your chart.
A: The production possibilities of two countries are shown in border 314. Without trade, an American worker used half the time to produce every kind of
Items, you can produce 50 shirts and 10 computers, and a Chinese worker can produce 50 shirts and 5 computers.
Figure 314 Production possibility boundary
B. If the two countries trade, which country will export shirts? Give a concrete example of a number and mark it on your chart. Which one
Countries will benefit from trade? Explain why.
Answer: China will export shirts. For the United States, the opportunity cost of producing a single computer is 5 shirts, while the opportunity cost of producing a shirt is
1/5 computers. For China, the opportunity cost of producing a computer is 10 shirts, while the opportunity cost of producing a shirt is 1/10 computers.
Therefore, the United States in the production of computers have a comparative advantage, China in the production of shirts have a comparative advantage, so China will export shirts.
The price of shirts is between 1/5 and 1/10 computers. Two countries will benefit from trade. For example, the price of a shirt is 1/8 computers, in other words,
China exports 8 shirts in exchange for 1 computers. China specializes in producing shirts (100 pieces)
, and exported 8 pieces of them, so there were 92 shirts and swapped back
1 computers. Without trade, 92 shirts and 1 computers are not likely to be produced in China. The United States specializes in producing computers (20 units) and
1 of them were exported to China in exchange for 8 shirts. In this way, the United States finally has 19 computers and 8 shirts, which is no trade when the United States cannot
The output that can be obtained. Thus, trade has increased the number of products that China and the United States can consume, and both countries have benefited.
C. Explain how much computer prices (measured in shirts) can be traded between the two countries.
A: The price of a computer will be between 5 and 10 shirts. If the computer price is less than 5 shirts, the United States will not export, because in the United States
The opportunity cost of a shirt is 1/5 computers. If the price of a computer is higher than 10 shirts, China will not import it because a computer in China
The opportunity cost is 10 shirts.
D. Assuming China's productivity catches up with the US, a Chinese worker can produce 100 shirts or 20 computers a year. You expect this
What the form of trade would be. How will this progress in China's productivity affect the economic well-being of the two countries?
A: At this time, the two sides will produce two kinds of goods at the same time, then trade, but at this time the trade is called horizontal trade, that is, productivity roughly
Trade in the same two countries. And China is doing vertical trade before it improves productivity. Vertical trade can improve the welfare of both countries,
Horizontal trade can also improve the welfare of both countries. The usual example is that the United States produces its own cars, but it still imports Japanese cars. The reason is that two
In terms of performance, fuel consumption and volume size, foreign vehicles can meet the diverse needs of Americans
This will improve the welfare of Americans. Overall, this progress in China's productivity will increase the economic well-being of both countries.
8. An ordinary Brazilian worker can produce 1 ounces of soybeans in 20 minutes and produce 1 ounces of coffee in 60 minutes;; And a general worker in Peru
1 ounces of soybeans can be produced in 50 minutes, and 1 ounces of coffee is produced in 75 minutes.
A. Is there an absolute advantage in the production of coffee?
A: The average Brazilian worker has an absolute advantage because he produces 1 ounces of coffee (60 minutes) than the average worker in Peru (75 minutes)
Less.
B. Who has a comparative advantage in the production of coffee?
A: The average worker in Peru has a comparative advantage. Because Peruvian workers have a lower chance of producing coffee per ounce (75/50=1.5 ounces of soybeans)
12 of the opportunity cost of coffee per ounce in Brazilian workers (60/20=3 soy ounces).
C. If the two countries have a professional division of labour and trade with each other, who will import coffee?
A: Brazil will import coffee from Peru because Peru has a comparative advantage in coffee production.
D. Assume that the two countries trade, and that the countries that import coffee use 2 ounces of soybeans to exchange 1 ounces of coffee. Explain why both countries will be from this
Benefit from trade.
A: Because the opportunity cost of both countries is lower than originally, the production time is saved (Brazil: 60-40 = 20 minutes; Peru: 100-75 = 25 minutes)
9. Are the following statements correct or wrong? Explain separately.
A. " Even if a country has an absolute advantage over all goods, the two countries can benefit from trade.
”
Answer: Yes. It is impossible for a country to have a comparative advantage over all goods, even if it has an absolute advantage in producing all the goods. Instead
Even if a country has no absolute advantage in the production of all goods, it will also have a comparative advantage over certain items.
B. " Some very talented people have a comparative advantage in doing everything.
”
Answer: wrong. It is not possible for a person to have a comparative advantage in doing two things at the same time, because if one thing represents the chance of another thing
The opportunity cost of these two things is reciprocal.
C. " If a trade can bring benefits to someone, then it will not benefit another person.
Answer: wrong. Trade is achieved by a win or multi-win situation. In trade, people each produce their own comparative advantages of products, total social production
Increase, everyone's situation will become better.
D. " If some kind of trade is good for one person, it is always good for another person.
”
Answer: wrong. The trade price of both parties must be located at the opportunity cost between the two.
E. " If trade can bring benefits to a country, it will certainly bring benefits to everyone in the country.
”
Answer: wrong. While trade can bring benefits to a country, it may undermine the interests of some people in the nation. For example, suppose a country has a ratio of wheat production
More advantages, in the production of cars have a comparative disadvantage, then, the export of wheat, imported cars to the country benefits, because now this country can eliminate
More goods for a fee. However, the emergence of trade, especially the import of automobiles, will undermine the interests of domestic auto manufacturers and manufacturers.
10. The United States exports maize and aircraft to the rest of the world and imports oil and textiles from other countries of the world. Do you think this trade form symbol
10
Does the principle of comparative advantage be combined?
A: This type of trade conforms to the principle of comparative advantage. If the United States exports corn and aircraft to other countries, it must have a better production of these goods than
More advantageous. As the United States imports oil and textiles, the United States certainly has a comparative disadvantage in producing these products.

Mankiw the principles of Economics (fifth edition) exercises answer chapter III interdependence and the benefits of trade