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Chapter 33: Q.10 (page 803)

What factors does Paul Krugman identify that supported expanding international trade in the 1800s?

Short Answer

Expert verified

Development of railroads, Suez canal, steamships, etc.

Step by step solution

01

Step 1. Introduction

International trade refers to the exchange of goods, services, and resources across international borders.

02

Step 2. Explanation

Paul Krugman has identified improvement in transportation as a factor that helped in the expansion of international trade. the development of railroads significantly improved the flow of trade on land. Goods and people were able to move long distances with the development of railroads.

The development of the Suez canal and steamships further improved transportation through the water. With steamships goods and people were able to move between continents.

The flow of information improved as efforts were focused on electronic technology such as the telegraph. Communication between different parts of the world became much easier.

All these developments significantly contributed to the expansion of international trade in the 1800s.

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Most popular questions from this chapter

You just overheard your friend say the following: “Poor countries like Malawi have no absolute advantages. They have poor soil, low investments in formal education and hence low-skill workers, no capital, and no natural resources to speak of. Because they have no advantage, they cannot benefit from trade.” How would you respond?

From earlier chapters you will recall that technological change shifts the average cost curves. Draw a graph showing how technological change could influence intra-industry trade.

In Japan, one worker can make 5 tons of rubber or 80 radios. In Malaysia, one worker can make 10 tons of rubber or 40 radios.

a. Who has the absolute advantage in the production of rubber or radios? How can you tell?

b. Calculate the opportunity cost of producing 80 additional radios in Japan and in Malaysia. (Your calculation may involve fractions, which is fine.) Which country has a comparative advantage in the production of radios?

c. Calculate the opportunity cost of producing 10 additional tons of rubber in Japan and in Malaysia. Which country has a comparative advantage in producing rubber?

d. In this example, does each country have an absolute advantage and a comparative advantage in the same good?

e. In what product should Japan specialize? In what product should Malaysia specialize?

True or False: The source of comparative advantage must be natural elements like climate and mineral deposits. Explain.

Brazil can produce 100 pounds of beef or 10 autos. In contrast the United States can produce 40 pounds of beef or 30 autos. Which country has the absolute advantage in beef? Which country has the absolute advantage in producing autos? What is the opportunity cost of producing one pound of beef in Brazil? What is the opportunity cost of producing one pound of beef in the United States?
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