Unit 15 Name Assignment (International Trade) 10 points Sourdough Bread el New Y
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Question
Unit 15 Name Assignment (International Trade) 10 points Sourdough Bread el New York San Francisco 10 Use the following data set above to answer the following questions: (1) What is the opportunity cost for New York to produce a unit of bagel? (0.5 pt) Work (1.5 point) (2) Who has an absolute advantage in producing Sourdough bread?(0.5 pt (3) who has a comparative advantage in producing bagels? (0.5 pts) (4) What are the two reason why high income economies engage in intra industry trade? (explain (5) Define and explain the terms of comparative advantage and terms of trades in your own words. Work (1.5 points) what each mean) (1.5 points) Provide an example. (2 points) 30 25 a 20 10 50 0 30 50 1001 150 200 250 Quantity of Production (6) According to the curve above, between what points does economics of scale exist? What does this mean? (2 points)Explanation / Answer
(1) New York:
10 Bagel = 8 Sourdough Bread
1 Bagel = 8/10 = 0.8 Sourdough Bread
So, answer is 0.8 Sourdough Bread
(2) Absolute advantage is the ability of a country to produce a good or service at a lower per unit cost as compared to any other country that produces same good or service.
New York has an absolute advantage in the production of Sourdough Bread because New York is able to produce more Bread than San Francisco.
(3) A country has a comparative advantage in producing that good if the opportunity cost of producing that good is lower in that country as compared to another country.
New York:
10 Bagel = 8 Sourdough Bread
1 Bagel = 8/10 = 0.8 Sourdough Bread
Opportunity cost of producing 1 Bagel is 0.8 Sourdough Bread.
San Francisco:
3 Bagel = 4 Sourdough Bread
1 Bagel = 4/3 = 1.33 Sourdough Bread
Opportunity cost of producing 1 Bagel is 1.33 Sourdough Bread.
Opportunity cost of producing 1 Bagel is less when it is produced by New York so New York has comparative advantage in the production of Bagel.
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