--%>
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 : Resource payments correspond to

    Explain the foundation of economics where society’s material wants are Resource payments correspond to resource categories?

    		•
  • Q : Explain the definition of Economics

    Explain the definition of Economics?

    		•
  • Q : Positive task of speculators in market

    A positive responsibility played through speculators within a market economy is to: (1) find out price levels for entrepreneurs. (2) predict the quantity at that long run equilibrium would be attained. (3) inform government organizations of consumer p

    		•
  • Q : Describe the Promoting stability

    Describe the Promoting stability?

    		•
  • Q : Are quantities supplied-demanded equal

    In perfectly competitive market, the market demand curve is given by Qd = 10 − Pd, and the market supply curve is given by Qs = 1.5Ps. a) Prove that the market equilibrium price and

    		•
  • Q : Interrelationships between economic

    Explain in detail the interrelationships between economic facts, theory, and policy.  Critically evaluate this statement:  “The trouble with economic theory is that it is not practical.  It is detached from the real world.”

    		•
  • Q : Summary of what can cause an increase

    Illustrate a summary of what can cause an increase in demand?

    		•
  • Q : Capitalism-Tightly regulate business I

    I have a problem in economics on Capitalism-Tightly regulate business. Please help me in the following question. The govt. in a purely capitalist state would not: (1) Find out the property rights. (2) Enforce contracts among private parties. (3) Offer

    		•
  • Q : Organization of employees-Division of

    ‘Mama’ Jean consists of one employee bake crumbly, graham cracker crusts at Mama’s Home-Pies, whereas the other stirs gooey, hot, apple filling. Her staff is organized in accord with a/an: (1) Task management system. (2) Division of labor. (3) Compar

    		•
  • Q : Determine the clearest illustration of

    The clearest illustration of economic inefficiency would be: (w) maintaining a warehouse full of pet rocks within hopes such that someday the fad will return. (x) pet rocks being unavailable to people willing to pay a price that exceeds the marginal s

    		•