--%>
Assignment Help - homework help

Illustrate the Comparative advantage and terms of trade

Illustrate the Comparative advantage and terms of trade?

E

Expert

Verified

The principle of comparative advantage for two countries, U.S. and Mexico, with a simplified example is in Mexico, the opportunity cost of 1 ton of soybeans is giving up 4 tons of avocados.  In the U.S., the opportunity cost of 1 ton of soybeans is 3 tons of avocados.  In other words, the comparative cost of soybeans is less in U.S. than in Mexico when the alternative is producing avocados.  Thus the U.S. should specialize in soybeans, and Mexico should specialize in avocados. If the two nations specialize according to comparative advantage, then to get the other product they must trade.  A nation has a comparative advantage in some product when it can produce that product at a lower domestic opportunity cost than can a potential trading partner.

   Related Questions in Business Economics

  • Q : Heterodox perspective of business

    I am facing difficulty in this question. Help me in find out correct answer of this economy based question. From heterodox perspective, why do business enterprises choose administered prices as opposed to highly flexible prices?

    		•
  • Q : Utilitarianism of Jeremy Bentham The

    The utilitarianism of Jeremy Bentham is generally closely akin to the philosophies of: (1) Epicurianism and hedonism. (2) pragmatism and instrumentalism. (3) asceticism and stoicism. (4) dialecticism and materialism. (5) fundamentalism and predestinat

    		•
  • Q : Distinguish between Individual as well

    Distinguish between Individual as well a market demand?

    		•
  • Q : Change in supply and a change in the

    Distinguish between a change in supply and a change in the quantity supplied?

    		•
  • Q : Cooperative and non-cooperative outcome

    Question: Cineplex and AMC are two rival movie theatre chains. They must each decide whether to set an admission price of $10 or set an admission price of $12; of course, the number of movie goers (and thus their r

    		•
  • Q : Favor laissez- faire economic policies

    Favor laissez- faire economic policies tended by Adam Smith, who also: (w) saw the requirement for several state intervention. (x) believed there were no conditions in which the government must intervene. (y) supported most government

    		•
  • Q : Demand often exceeds supply and supply

    “In the corn market, demand often exceeds supply and supply sometimes exceeds demand.” “The price of corn rises and falls in response to changes in supply and demand.” Among these 2 statements used correctly which in the terms “supply&rdq

    		•
  • Q : Market system & a command economy try

    Contrast how a market system and a command economy try to cope with economic scarcity?

    		•
  • Q : Local expenditures and receipts for all

    Elucidate the Local expenditures and receipts for all local governmental units in 1996?

    		•
  • Q : Explain about the successful speculation

    Successful speculation tends to: (1) generate inflationary pressure. (2) assist stabilize relative prices. (3) reduce the incomes of the eventual producers of goods. (4) make relative prices more volatile. (5) increase the risk born through the eventu

    		•