Homework instructions

Trade Trade is a topic claimed by both macro and microeconomics. It is a phenomenon that happens globallyi which makes it macroeconomic. but examining how a market is affected by trade is a microeconomic question. Quaccguntof this, trade is often relegated to end of books but one of my favorite books: by Bernanke and Frank, has trade as its first chapter. Leaders say to celebrate diversity. Economists say to exploit it. I begin with the notion of absolute advantage: which asks who ithebest at making something given equal resources. This is a mute question because I have seen the Japanese go through industries (photocopying, boat engines, air conditioners) by exploiting their absolute advantage. This situation is akin to washing dishes with your middle school sibling; you can do all three tasks better than he can which means you have an absolute advantage in all nes but does this mean he must not help? The better question asks who has the comparative advantage? The comparative advantage does not ask who does the most but who gives up the Leasthhich in this case is your brother who instead of studying for college orworking (like yourself} would be playing video games. corn cranberry corn cra nberry Mass 40 10 4 1 Net) 80 4 20 1 Above ifrst given the raw ratios on the left we quickly reduce them to the ones on the right. Massachusetts oughtto grow the cranberries and not because it can grow 10 versus 4 per unit of land but because it sacrices 4 and not 20 Q. As mentioned earlier, Japan has the absolute advantage in most industries and a country can have the absolute advantage in 51 but a comparative advantage can only be had in one product. Hence if Mass has the comparative advantage in cranberry W then corn goes to Neb. Now for terms of trade. Mass benets so long as 1 cranberry trades for more than 4 corn. Neb benefits so long as 1 cranberry costs less than 20 com. 204 is 16 and how will this difference be split? Since 16 is a perfect square, then we get 4 by taking the square route of 16. We add this 4 back on to 1 cranberry: 4 corn to get 1 cranberry: 8 Q. In the end Mass grows 10+10 cranberry ratherthan 40 com and 10 wfor a 20 cranberry total while Neb grows 80+80 corn. As for the amount traded there are many correct answers sol close by offering just one. Mass sends 6 out of 20 to keep 14 m. Neb repays with 48 com (8:1) and keeps 112. Mass comes away with 48,14 and Neb112.6 both places gain in both categories. Life has few mums but trade is one of them