Problem

In Exercise 19.33, is there an “ask” where Venezu…

00:44

Problem 33 Easy Difficulty

Review the numbers for Canada and Venezuela from Table 19.14 which describes how many barrels
of oil and tons of lumber the workers can produce. Use these numbers to answer the rest of this question.
a. Draw a production possibilities frontier for each country. Assume there are 100 workers in each
country. Canadians and Venezuelans desire both oil and lumber. Canadians want at least 2,000
tons of lumber. Mark a point on their production possibilities where they can get at least 3,000 tons.
b. Assume that the Canadians specialize completely because they figured out they have a comparative advantage in lumber. They are willing to give up 1,000 tons of lumber. How
much oil should they ask for in return for this lumber to be as well off as they were with no
trade? How much should they ask for if they want to gain from trading with Venezuela? Note:
We can think of this “ask” as the relative price or trade price of lumber.
c. Is the Canadian “ask” you identified in (b) also beneficial for Venezuelans? Use the production
possibilities frontier graph for Venezuela to show that Venezuelans can gain from trade.

Answer

a. (GRAPH CANNOT COPY)
b. So, one of the possible prices that country C could ask from country $\mathrm{V}$ and they could gain also from trade is $1,000$ barrels of oil.
c. (GRAPH CANNOT COPY)

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Principles of Microeconomics for AP® Courses

Chapter 19

International Trade

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Video Transcript

So let's review the numbers for Canada and Venezuela from the table that describes how many barrels of oil and tons of lumber the workers can produce. I want to use the number to answer the rest of the question. So the first question is to draw a production possibility frontier for each country. So it's a drop of production possibility. Frontier for each country. Assume the NGO workers in each country, Canadians and Venezuela's desirable oil A number. Canadians want at least 2000 2000 tons off lumber, right on market market points in the production persecutor frontal, where they can get at least 3000 tons. So we're going to be joined that so production for the possibility Frontier. Basically, um, the car basically shows all the possible combinations of production of struggles with the giving common impute. So I'm going to be joined that first. So for countries, see which is Canada between right here a point for country V, which is Venezuela. They'll be right here. So this side is the barrel off oil. I'm decided the tons off lumber so and then the point is, remember that we have to at least 2000 But you want a point where they have at least 2000. So this will be right here and then the 2000 be right like this. So this is what the production possibility frontier for, um, Canada should look like. I'm for Venezuela. She went through 6000 and in 3000, and then this points basically makes a point. So this is the difference on this point on? The graph for Canada basically shows the point where the people of countries he could get 3000 tons of lumber. So now moving on to the next question assume that Canada specialized completely because they figured out that they have comparative advantage in lumber. So they're willing to give up 1000 tons of lumber. How much all should they ask for in return for this number to be as well as to be as well off as they were with no trade? And how much should they asked for if they once again from trading with Venezuela? So now, if country see kind of doubt produces only number and they need 3000 of their own production, then they can trade ah 1000 tons of lumber with Venezuela so Okay, if countries see produces on Lee number, Okay. Yeah. Under need. 3000 of their own production, then the country. 1000 tons off lumber with countries. See? Right, Our country v Venezuela. So the opportunity cost of producing on 1000 tons of lumber was 500 barrels of oil, right? So on opportunity cost. Of course, that is for going to get a new alternative. So opportunity cost. Yeah, off producing 1000 huns off lumber. Yes. Okay, I'm sorry, is 500 barrels of oil. So if they should ask for at least 500 hours of, or in exchange from country Venezuela so so that they're in the same position as before. So basically, they should ask for at least 500 five Malik company barrels in exchange from current tree country V so that they can be in the same position as before. Yeah. Uh huh. So they should act for at least 500 Barrow's in exchange from countries we so that they are in the same position as before. So one of the possibility possible prices that countries see could acts from country V, and they could also gain, um, from trade is 1000 barrels of oil. So country see graphs, country the for 1000 barrels off, Um, and again from trade. So that's the answer. Not the last question is the Canadian. If the Canada asks you identified in B, it's a candidate. Actually, is fighting be also beneficial for Venezuela's on use the production possibility from Telegraph for Venezuela to show that Venezuelans can gain from the treat. So now, for country V, the production possibility frontier cough would be so the barrels of oil will be right here on the turns off Lombard right here. So this point is 3000. This point is 6000 105,000. So at 5000 barrels of oil, there's 1000 long term is 1000 tons of lumber on the barrels off, all at 6000 goes all the way to 3000 tons of lumber. So now country V was producing 6000 on barrels of oil, and now they have they have to trade 1000 barrels of oil, 4000 tons off Simba lumber weather. So the opportunity cost of producing, Um, I've got to mention that this is for country. The the graphics for contribute. So the production cost off opportunity cost of producing 1000 tons of lumber and V is 2000 barrels of oil. So there will be a benefit because now they have 5000 barrels off oil and 1000 barrels off number, which we can see in the graph beyond the original production possibility Frontier, which is the 6000 or 3000 so country visas that benefits. So we can say in summary, the opportunity cost off, producing 1000 tons of lumber envy. It's 2000 barrels of oil, so there will we as benefits. I've been 5000 Barrows off oil on 1000 tones of lumber, so that's the answer.

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Principles of Microeconomics for AP® Courses

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Problem

In Exercise 19.33, is there an “ask” where Venezu…

Problem 33 Easy Difficulty

Answer

a. (GRAPH CANNOT COPY)
b. So, one of the possible prices that country C could ask from country $\mathrm{V}$ and they could gain also from trade is $1,000$ barrels of oil.
c. (GRAPH CANNOT COPY)

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Watch More Solved Questions in Chapter 19

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Steven A. Greenlaw, David Shapiro, Timothy Taylor

Principles of Microeconomics for AP® Courses

a. (GRAPH CANNOT COPY)b. So, one of the possible prices that country C could ask from country $\mathrm{V}$ and they could gain also from trade is $1,000$ barrels of oil.c. (GRAPH CANNOT COPY)

Principles of Microeconomics for AP® Courses

Steven A. Greenlaw, David Shapiro, Timothy TaylorPrinciples of Microeconomics for AP® Courses

a. (GRAPH CANNOT COPY)
b. So, one of the possible prices that country C could ask from country $\mathrm{V}$ and they could gain also from trade is $1,000$ barrels of oil.
c. (GRAPH CANNOT COPY)

Steven A. Greenlaw, David Shapiro, Timothy Taylor

Principles of Microeconomics for AP® Courses