Chapter 19: Q 23. (page 462)
Does intra-industry trade contradict the theory of
comparative advantage?
No, it doesn't contradict.
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Why might a low-income country put up barriers
to trade, such as tariffs on imports?
How can there be any economic gains for a country from both importing and exporting the same good, like cars?
Look at Exercise 19.2. Compute the opportunity
costs of producing sweaters and wine in both France and Tunisia. Who has the lowest opportunity cost of producing sweaters and who has the lowest opportunity cost of producing wine? Explain what it means to have a lower opportunity cost.
Consider two countries: South Korea and Taiwan. Taiwan can produce one million mobile phones per day at the cost of \(10 per phone and South Korea can produce 50 million mobile phones at \)5 per phone. Assume these phones are the same type and quality and there is only one price. What is the minimum price at which both countries will engage in trade?
Do consumers benefit from intra-industry trade?
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