Lets assume the US and Singapore can only produce two goods: Let\'s assume that
ID: 1164987 • Letter: L
Question
Lets assume the US and Singapore can only produce two goods:
Let's assume that the U.S. and Singapore can only produce two goods: Civilian aircraft (and parts) and Semiconductors. Let's also simplify this by assuming that there are not diminishing returns to investment, so the PPF for each country is not bowed out. Assume the U.S. can produce 5,000 civilian aircraft per year or 500,000 semiconductors. Singapore can produce 1,000 aircraft per year or 400,000 semiconductors Note: Capitalize your answers and do not abbreviate them for the written answers. Use only numbers, rounded up to the nearest whole number, for the numerical answers. Who has the absolute advantage in producing aircraft? Who has the absolute advantage in producing semiconductors? Who has the comparative advantage in producing aircraft? Who has the comparative advantage in producing semiconductors? If each country divided its resources evenly between aircraft and semiconductor production, how many aircraft would be produced total? How many semiconductors would be produced total? If the country with a comparative advantage in producing aircraft specialized and only produced aircraft, and the country with a comparative advantage in producing semiconductors specialized ly produced semiconductors, how many aircraft would be produced? How many semiconductors would be produced? How many more aircraft and semiconductors would there be in the economy as a whole as a result of specialization? (Format answer as: Xxxx, yvYYY) In reality, the U.S. exports $3.7 billion worth of civilian aircraft and parts to Singapore and imports $1.4 billion worth of semiconductors from Singapore each year. If the two countries trade nothing else, what does this do to U.S. GDP?Explanation / Answer
(a) US has absolute advantage in producing aircraft.
[Since US can produce more aircraft than Singapore can: 5000 > 1000]
(b) US has absolute advantage in producing semi-conductor.
[Since US can produce more semi-conductors than Singapore can: 500,000 > 400,000]
(c) US has comparative advantage in producing aircraft.
In US, opportunity cost of aircraft = 500,000 / 5,000 = 100 semi-conductors
In Singapore, opportunity cost of aircraft = 400,000 / 1,000 = 400 semi-conductors
Since US can produce aircraft at a lower opportunity cost (100 < 400), US has comparative advantage in aircraft.
(d) Singapore has comparative advantage in producing semi-conductor.
In US, opportunity cost of semi-conductor = 5,000 / 500,000 = 0.01 aircraft
In Singapore, opportunity cost of semi-conductor = 1,000 / 400,000 = 0.0025 semi-conductors
Since Singapore can produce semi-conductor at a lower opportunity cost (0.0025 < 0.01), Singapore has comparative advantage in semi-conductor.
NOTE: As per Chegg Answering Policy, first 4 parts are answered.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.