--%>
Assignment Help - homework help

Illustrate the rate of exchange of two products

Illustrate the rate of exchange of two products?

E

Expert

Verified

The rate of exchange of these two products will be determined through negotiation; the outcome is called the terms of trade.  The terms of trade will be limited by the relative costs of production within each country.  The U.S. will not forgo more than 1 ton of soybeans to get 3 tons of avocados and Mexico will not give up more than 4 tons of avocados for 1 ton of soybeans.  Somewhere between these limits, trade is possible.  In the text example, the terms of trade are assumed to be 3.5 tons of avocados for each ton of soybeans.  Americans would specialize in soybeans only if they could obtain more than 3 tons of avocados for 1 ton of soybeans by trading with Mexico.

   Related Questions in Business Economics

  • Q : Speculation and intermediary operations

    Transaction costs tend to be decreased, prices to consumers are classically stabilized and lowered, and economy-wide efficiency is generally improved through: (1) rigid wage and price controls. (2) central planning that fosters monopo

    		•
  • Q : Economic Why are democratic regimes

    Why are democratic regimes more conducive to economic growth than dictatorship

    		•
  • Q : Explain Self-interest of the Market

    Explain Self-interest of the Market System?

    		•
  • Q : Why is speculation unlike arbitrage

    Speculation is unlike arbitrage since: (1) speculative buyers always break even. (2) speculation causes increased costs. (3) speculators bear no risk. (4) positive returns for speculators are not sure. (5) competitive speculation equa

    		•
  • Q : Banking crisis on checkable deposits

    Question: Some developing countries have suffered banking crises in which depositors lost part or all of their deposits (in some countries there is no deposit insurance). This type of crisis decreases depositors' confidence in the banking syst

    		•
  • Q : Principle of comparative advantage When

    When Gene can make three pairs of cowboy boots per week or one saddle whereas Roy can make either two pairs of boots or two saddles, Gene will form boots whereas Roy makes saddles according to the: (i) Law of Occam’s Razor. (ii) Principle of comparative advantag

    		•
  • Q : What is the opportunity cost of your

    Suppose you arrive at a store expecting to pay $100 for an item, but learn that a store two miles away is charging $50 for it.  Would you drive there and buy it?  How does your decision benefit you?  What is the opportunity cost of your decision?  Now suppose you arrive at a s

    		•
  • Q : How will the goods and services be

    How will the goods and services be produced?

    		•
  • Q : Elucidate how to maintain competition

    Elucidate how to maintain competition?

    		•
  • Q : Elucidate redistribution of income

    Elucidate redistribution of income?

    		•