DOCSLIB.ORG

Ability-To-Pay Principle 277 Absolute Advantage Theory (Smith) Normative

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Ability-To-Pay Principle 277 Absolute Advantage Theory (Smith) Normative JOBNAME: Pirlot PAGE: 1 SESS: 3 OUTPUT: Fri Sep 15 09:29:28 2017 Index ability-to-pay principle 277 Belgium absolute advantage theory (Smith) carbon equalisation mechanism 77 normative comparative advantage energy taxes 128 vs. 90–91 BEPS (Base Erosion and Profit revised theory and environmental Shifting) project (OECD) 20, BTAs 85–86, 88–89, 97 284 traditional BTAs and 14, 31, 44–47 bilateral/double tax adjustment concept agreement/convention 1, 279 in environmental BTA tax design border carbon adjustment, use of term 122–124 49–50, 121–122 in traditional BTA tax design border concept 102–103 in environmental BTA tax design Agreement on Subsidies and 119–120 Countervailing Measures in traditional BTA tax design (ASCM) 165, 177, 192–195, 222 101–102 Annex I, footnote 58 179, 195–196, border tax adjustments (BTAs) 229 overview 1–5 Annex I, footnote 61 203–204 definition 23–25 Article 1.1/1.1(a)(1)(ii) 178–179, neutrality of 28–29, 33–34 196–197 tax models and 181–183 Article 3.1(a) 177, 178–180, 197 British thermal unit (BTU) energy tax, Article 8 246 proposed 72–73 direct vs. indirect taxes 179 exemptions from national Canada regulations 234 carbon taxes 128 indirect taxes, definition 195–196 disposal fees and BTAs 56–57 aim-and-effect test 214–215 carbon equalisation mechanism anti-dumping measures 97, 98, 120, 76–79, 148 153, 177–178 carbon/pollution leakage 2, 50–51, 66, Australia 68, 76, 82, 145, 247, 254 carbon pricing mechanism 85 carbon taxes 64, 75, 91–92, 127–129 Clean Energy Act (2011) 83, 84–85 model based on environmental Customs Tariff Act (1995) 124 excise duty 133–137 tax system and environmental BTAs carbon-added tax (CAT) 137–146 83–85, 129 carbon value vs. purchase price averaging, in tax rates 32, 73, 80–81, 139–142 194, 206, 236–238, 252 comparison to VAT system 139–142 aviation sector 78–80, 125, 262–263, critique of 144–146 267–268 environmental BTAs and 236–238 323 Alice Pirlot - 9781786435514 Downloaded from Elgar Online at 10/01/2021 02:22:39PM via free access Columns Design XML Ltd / Job: Pirlot-Environmental_border_tax_adjustments / Division: Index /Pg. Position: 1 / Date: 6/9 JOBNAME: Pirlot PAGE: 2 SESS: 4 OUTPUT: Fri Sep 15 09:29:28 2017 324 Environmental border tax adjustments and international trade law green-added tax and 142–143 corporate income taxes 190–191 retail carbon tax (RCT) and countervailing measures 49–50, 147–148 97–98, 120 carbon-related BTAs 68–69 see also Agreement on Subsidies cascade taxes 32, 41–42, 106–107, and Countervailing Measures 206 (ASCM) certification systems 150, 153–154, customs duties 24–25, 97, 98, 237–238 102–103, 110, 120, 153 Common but Differentiated customs value 139–142, 151, 166–167 Responsibilities (CBDR) principle 268–274 Denmark comparative advantage theory carbon taxes 127–128 (Ricardo) 184 general vs. specific taxes 25–26 energy taxes 127 in the efficiency-relevant sense value-added tax (1960s) 18 (Howse) 91 destination principle 23–24, 33, normative comparative advantage 39–43, 74, 80–81, 108, 115, vs. 91 184–188 OECD report citation of 59 destination-based corporate taxes (de revised theory and environmental la Feria and Devereux) 187–188, BTAs 85–88, 97, 189–190 194 tax neutrality 15–16, 28 destination-based X tax (Bradford) traditional BTAs and 12–17, 30–31, 182–183 44, 45, 103 developing countries 268–271 competitive advantage vs. 17 adoption of BTAs and 33–34, 69, competitiveness argument 2, 66 71–72, 145, 203–204, 236, absolute advantage theory (Smith) 256–257 46 CBDR principle and 268–271 adoption of environmental BTAs polluter-pays principle and 273–274 and 58–59, 62–63, 88–89, 97, direct vs. indirect taxes 13, 26–32, 132–134 39–40, 179, 188 double dividend hypothesis and 156 see also legal framework, of environmental border taxes and environmental BTAs; legal 50–51 framework, of traditional BTAs in EU 75–76, 81 directly competitive or substitutable excise taxes and 127–128, 226–227 (DCS) products 218–222 subsidies and 158 discriminatory taxes 34, 41, 80–81, see also legitimate absolute 210–211 advantage theory see also legal framework, of conflict diamonds 154, 244–245 environmental BTAs; legal consumption taxes 26–31, 107–114, framework, of traditional BTAs 189, 225–228, 277–278 dissimilar taxation concept 222 see also individual types double dividend hypothesis 156 Convention on Biological Diversity double taxation concept 59, 109–111, 266–267, 274 117, 123, 239–240, 245, Convention on International Trade in 278–281 Endangered Species of Wild Fauna and Flora (CITES) 275 economic allegiance 187–188 Alice Pirlot - 9781786435514 Downloaded from Elgar Online at 10/01/2021 02:22:39PM via free access Columns Design XML Ltd / Job: Pirlot-Environmental_border_tax_adjustments / Division: Index /Pg. Position: 2 / Date: 13/9 JOBNAME: Pirlot PAGE: 3 SESS: 3 OUTPUT: Fri Sep 15 09:29:28 2017 Index 325 electricity (taxes on electricity) 65, revised absolute advantage theory 72–73, 80–82, 127–128 85–86, 88–89, 97 energy taxes 83, 127–128 revised comparative advantage energy-intensive products 73, 74, theory 85–88, 97 75–76, 91–92, 128–129, role of GATT in tax matters 55 133–137, 145, 148, 203–204, role of OECD in tax matters 54 252 summary conclusions 98 environmental border tax adjustments Swiss proposals for 82–83 (BTAs) taxes on inputs as eligible for overview 1–5, 287–288 adjustments 63–65 background of 56–57 US views on 70–74 call to political actors/stakeholders environmental law principles, and 286–288 Critical Legal Studies approach to environmental BTAs 265–276 4–5, 282–284 environmental tariffs 50 definition 58 see also countervailing measures economic foundation of 49–53 environmental taxes summary conclusions 282–288 with cross-border character environmental border taxes 50–53 278–280 environmental BTA history, and distinguished from traditional taxes GATT-WTO/OECD 48–98 224–225 background of 56–57 fiscal nature of 122 definition 58 market-based measures vs. 121–122 direct/indirect and on producers 148 production/product taxes as regulations vs. 3, 231–235 eligible for adjustments 60–63 revenue from 155–158 economic foundation of environmental value of products environmental border taxes 149–151 49–53 environmental VAT model 143–144, EU views on 74–82 146–147 externalities to be internalised 91, equalisation taxes see border tax 95–96, 97 adjustments (BTAs) externality costs 92–94 European Coal and Steel Community GATT/WTO Notes (1997) overview (ECSC) 57–58 Community of Experts, Tinbergen interactions between report 39–42 traditional/environmental BTAs European Court of Justice (ECJ) foundations 96–98 on compatibility with domestic Japanese reports on 82 electricity duty with EU law legitimate absolute advantage 80–81 theory 60, 85–86, 89–92, 95, on inclusion of aviation sector into 97, 285 EU ETS 262–263, 267–268 OECD Note (1994) overview 57–58 on polluter-pays principle 272 other international developments see also Table of Cases 66–69 European Economic Community rationales for 58–60 (EEC) reception of OECD/GATT reports Commission White Paper (1985) 65–66 42–43 Alice Pirlot - 9781786435514 Downloaded from Elgar Online at 10/01/2021 02:22:39PM via free access Columns Design XML Ltd / Job: Pirlot-Environmental_border_tax_adjustments / Division: Index /Pg. Position: 3 / Date: 6/9 JOBNAME: Pirlot PAGE: 4 SESS: 3 OUTPUT: Fri Sep 15 09:29:28 2017 326 Environmental border tax adjustments and international trade law tax harmonisation working group Article I, most-favoured nation 11, reports 40–44 166, 238–240, 243, 245, European Union (EU) 256–257, 268–269, 271, 280 Aviation Directive 78–80, 125, Article II/II:2(a) 167–177, 180, 192, 262–263, 267–268 199–201, 204, 242, 283 carbon equalisation mechanism Article III/III:1/III:2/III:4 167–177, 76–79 180, 184, 192–193, 199–202, Directive on energy products and 204–223, 231, 234, 242, 283 electricity 81 Article VI 177–180 emission-trading scheme (ETS) Article VII 166–167, 199 76–78, 121, 125, 148, 232, 234 Article XIX 243–244 excise taxes 43–44, 112–114 Article XVI 177, 180, 192–193, release for consumption, definition 195–196 112–113 Article XX 242–257, 274–276 VAT system 35, 41–43, 105, Article XXI 243–244 107–112, 172, 198, 229–230, Article XXIII 177 237 Article XXIV 243–244 views on environmental BTAs certification systems 154 74–82 Havana Charter 184 views on traditional BTAs 38–44, ‘Industrial Pollution Control and 78 International Trade’ (1971) 55, excise taxes 56, 61 competitiveness argument and Subsidies Code 177 127–128, 226–227 ‘Trade effects of Environmental during 1960s 106–107 Measures’ (1993) 61–62 in EU 43–44, 112–114 Working Party on BTAs 21–24, as models for environmental BTAs 33–34 125–129, 229–230 see also Agreement on Subsidies ODC taxes and 129–137, 236 and Countervailing Measures see also individual types (ASCM); legal framework, of exhaustible natural resources 253–255 environmental BTAs; legal framework, of traditional externalities, definitions 92–94 BTAs; Table of Cases; externality costs 90, 92–96, 146 traditional BTA history, and extraterritoriality 258–263, 278 GATT/OECD; World Trade Organisation (WTO) fair international trade concept 90 General Agreement on Trade in Finland, electricity taxes 80–81 Services (GATS) fiscal sovereignty principle 278 advertising services 201–202 fixed exchange rates 30 Article XIV 245 France exceptions provisions 243–245 carbon equalisation mechanism 77 taxes on services 104–106 TVA taxes 26, 106–107 GHG emissions 68, 124–125, 134, free-rider issues, and MEAs 78 142, 230, 264, 267 goods and services General Agreement on Tariffs and in environmental BTA tax design Trade (GATT) (1947) 11 124–125 Alice Pirlot - 9781786435514 Downloaded from Elgar Online at 10/01/2021 02:22:39PM via free access Columns Design XML Ltd / Job: Pirlot-Environmental_border_tax_adjustments / Division: Index /Pg.
Load more

Recommended publications
  • Distributional Effect of International Trade and Comparative Advantage in Labor Markets∗
    Distributional Effect of International Trade and Comparative Advantage in Labor Markets∗ Rodrigo Adão MIT September 20, 2015 Abstract This paper investigates the distributional consequences of international trade shocks in the con- text of the Brazilian labor market. First, I document a new set of facts about how differential ex- posure to commodity price shocks across educational groups and regions leads to differential out- comes in terms of sectoral employment and wages. Second, I show that such facts are qualitatively consistent with a two-sector Roy model where worker heterogeneity regarding comparative and ab- solute advantage in sector-specific tasks determines the structure of employment and wages. Third, I establish that the schedules of comparative and absolute advantage are nonparametrically iden- tified from cross-regional variation in sectoral responses of employment and wages induced by sector demand shocks. Lastly, I build on this result to structurally estimate the model in the sample of Brazilian local labor markets. My structural estimates indicate that a 10% decrease in commod- ity prices causes counterfactual increases of 1.2% in the skill wage premium and of 5% in wage dispersion. ∗Author contact information: [email protected]. I am extremely grateful to Daron Acemoglu, Arnaud Costinot and Dave Donaldson for invaluable guidance and support. I also thank Pol Antras, David Autor, Arthur Braganca, Ariel Burstein, Dejanir Silva as well as seminar participant at the MIT Labor Lunch and the MIT Macro-International Lunch. All errors are my own. 1 1 Introduction In an integrated world economy, shocks in a particular country have the potential to exert different effects across different workers within another country located on the other side of the globe.
    [Show full text]
  • International Trade
    International Trade or centuries, people of the world have traded. From the ancient silk routes and spice trade to modern F shipping containers and satellite data transfers, nations have tied their economies to the rest of the world by complex flows of products and services. Free trade, which allows traders to interact without barriers imposed by government, can improve the living standards of people because it reduces prices and increases the variety of goods and services for consumers. It can also create new jobs and opportunities, and it encourages innovative uses of resources. However, even though free trade can benefit an economy as a whole, specific groups may be hurt. While certain sectors will experience job gains, others will face job losses. Still, societies throughout history have found that the benefits of international trade outweigh the costs. Why Trade? As consumers, all of us have an interest in trading they live, is because they believe they will be better with other countries. We often are unaware of trade’s off by trading. When we consider the alternative— influence on product prices and the quality and each of us producing everything for ourselves—trade availability of the goods we buy. But we all benefit simply makes more sense. from the greater abundance and variety of products and the lower prices that trading with others makes Trade is beneficial because it allows people to possible. Without trade, countries become isolated. specialize, or concentrate their work in the type of The quality of their goods and services lags behind production that they do best.
    [Show full text]
  • 252 Effects of Comparative Advantage on Exports
    View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by AMH International (E-Journals) Journal of Economics and Behavioral Studies Vol. 5, No. 5, pp. 252-259, May 2013 (ISSN: 2220-6140) Effects of comparative advantage on exports: A case study of Iranian industrial subsectors Masoud Nonejad*, Samira Zamani Islamic Azad University of Shiraz, Iran *[email protected] Abstract: One of the informational requirements in planning import and export activities is to an awareness of a country’s comparative advantage in the production of goods and services. The present paper attempts to assess Iran’s Revealed Comparative Advantage (RCA) in industrial subsectors based on two-digit code of the International Standard Industrial Classification (ISIC) and effects of five top subsectors with the highest average of RCA on the total Iranian real industrial exports. RCAs for Iranian industrial subsectors (during 2001-2010) were calculated for 2001-2010 time period and seasonal data (2001- 2010) were collected to estimate the RCA Model. Auto Regressive Distributed Lags (ARDL) Method was employed to investigate the effects of these subsectors on the total Iranian real industrial exports. The econometric results show that the subsectors with highest RCA average have a positive and significant effect on the total Iranian real industrial exports. Key words: Revealed Comparative Advantage, Iranian industrial subsectors, Auto Regressive Distributed Lags (ARDL), Error Correction Model (ECM) 1. Introduction Today, foreign trade comprises a significant part of economic activities in many countries throughout the world. Besides, the significance and the role of foreign trade in the countries’ economic development have been rising since the early 19th century due to an unprecedented growth in the global economy.
    [Show full text]
  • Rural 3.0. a Framework for Rural Development (Policy Note)
    POLICY NOTE RURAL 3.0. A FRAMEWORK FOR RURAL DEVELOPMENT ABOUT This Policy Note shares the OECD’s Rural Policy 3.0—a framework to help national governments support rural economic development. The New Rural Paradigm, endorsed in 2006 by OECD member countries, proposed a conceptual framework that positioned rural policy as an investment strategy to promote competitiveness in rural territories. This approach represented a radical departure from the typical subsidy programmes of the past that were aimed at specific sectors. Rural Policy 3.0 is an extension and a refinement of this Paradigm. Where the New Rural Paradigm provided a conceptual framework, the Rural Policy 3.0 focuses on identifying more specific mechanisms for the implementation of effective rural policies and practices. For more information: http://www.oecd.org/regional/regional- policy/oecdworkonruraldevelopment.htm Forllow us on Twitter: @OECD_local #OECDrural © OECD 2018 This work is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the Organisation or of the governments of its member countries. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. │ 3 CONTENTS INTRODUCTION ..................................................................................................................................
    [Show full text]
  • ECO 212 – Macroeconomics Yellow Pages ANSWERS Unit 1
    ECO 212 – Macroeconomics Yellow Pages ANSWERS Unit 1 Mark Healy William Rainey Harper College E-Mail: [email protected] Office: J-262 Phone: 847-925-6352 Which of the 5 Es of Economics BEST explains the statements that follow: Economic Growth Allocative Efficiency Productive Efficiency o not using more resources than necessary o using resources where they are best suited o using the appropriate technology Equity Full Employment Shortage of Super Bowl Tickets – Allocative Efficiency Coke lays off 6000 employees and still produces the same amount – Productive Efficiency Free trade – Productive Efficiency More resources – Economic Growth Producing more music downloads and fewer CDs – Allocative Efficiency Law of Diminishing Marginal Utility - Equity Using all available resources – Full Employment Discrimination – Productive Efficiency "President Obama Example" - Equity improved technology – Economic Growth Due to an economic recession many companies lay off workers – Full Employment A "fair" distribution of goods and services - Equity Food price controls – Allocative Efficiency Secretaries type letters and truck drivers drive trucks – Productive Efficiency Due to government price supports farmers grow too much grain – Allocative Efficiency Kodak Cuts Jobs - see article below o October 24, 2001 Posted: 1728 GMT [http://edition.cnn.com/2001/BUSINESS/10/24/kodak/index.html NEW YORK (CNNmoney) -- Eastman Kodak Co. posted a sharp drop in third- quarter profits Wednesday and warned the current quarter won't be much better, adding it will cut up to 4,000 more jobs. .Film and photography companies have been struggling with the adjustment to a shift to digital photography as the market for traditional film continues to shrink. Which of the 5Es explains this news article? Explain.
    [Show full text]
  • OECD Economic Studies – No. 36, 2003/I
    OECD Economic Studies No. 36, 2003/1 THE INFLUENCE OF POLICIES ON TRADE AND FOREIGN DIRECT INVESTMENT Giuseppe Nicoletti, Stephen S. Golub, Dana Hajkova, Daniel Mirza and Kwang-Yeol Yoo TABLE OF CONTENTS Introduction................................................................................................................................. 8 Recent trends in trade, FDI and the internationalisation of production............................. 9 Trends in FDI ........................................................................................................................... 10 Trade developments: goods and services........................................................................... 17 Twin developments in FDI and trade................................................................................... 22 Policy and other determinants of trade and international investment............................... 24 Openness................................................................................................................................. 24 Product-market regulation..................................................................................................... 33 Labour-market arrangements................................................................................................ 37 Infrastructure ........................................................................................................................... 38 Geographical and economic factors ....................................................................................
    [Show full text]
  • The World Trade System
    International the world trade system how it works and what’s wrong with it | september 2003 rod harbinson/www.diversityphotos.com the world trade system how it works and what’s wrong with it I august 2003 This briefi ng, one in a series entitled Sale of the Century? from Friends of the Earth International, examines the theories, impacts and institutions of world trade and assesses the infl uence of transnational corporations. contents 10 reasons why the world trade system harms people and the planet I 2 10 reasons why the wto harms people and the planet I 4 who said what? – notable quotes about ‘free trade’ ? I 6 introduction I 7 why do we trade? I 8 what is trade? I 8 why trade? I 8 trade fl ows I 9 what is ‘free trade’ and what’s wrong with it? I 11 the history of ‘free trade’ I 11 ‘free trade’ theory and its fl aws I 11 the impacts of ‘free trade’ I 13 governments, corporations and trade issues I 21 the world trade organisation - past, present and future I 27 principles I 27 content, structure and processes I 28 the third ministerial conference, seattle I 29 the fourth ministerial conference, doha I 30 the fi fth ministerial conference, cancún I 31 conclusion I 37 key references and reading I 38 contacts I 40 other briefi ngs in this series include: the world trade system: winners and losers towards sustainable economies: challenging neoliberal economic globalisation trade and people’s food sovereignty You are invited to reproduce information from this briefi ng, but asked to acknowledge Friends of the Earth International as the source of your information.
    [Show full text]
  • Academic Year 2018- 2019 Third Term Economics Revision Sheets
    Academic Year 2018- 2019 Third Term Economics Revision sheets Name: ________________________ Date: _______________ Grade: 11 Sections: _____________ SECTION A: DIAGNOSIS: I: Choose the letter of the choice that best answer the questions; 1. A depreciation of a currency occurs when__________________ a) The value of currency falls b) The value of the currency increases c) Inflation falls d) Balance of payment improves 2. If one Canadian dollar is equal to US$0.6134, then one US dollar is equal to how many C$? a) $1.6303 b) $1.5406 c) $1.5967 d) $1.4534 3. If one Euro is equal to C$1.4904, then one Canadian dollar is equal to how many Euros? a) 0.6453 b) 0.6767 c) 0.6710 d) 0.6545 Page 1 of 6 4. Appreciation of a currency is ___________. a) the increase in the value of one currency in terms of another. b) the decrease in the value of one currency in terms of another. c) A sudden increase in the value of a currency that had previously been fixed in value. d) an sudden decrease in the value of a currency that had previously been fixed in value. 5. Demand-pull inflation may be caused by_________. a) An increase in costs b) A reduction in interest rates c) A reduction in government spending d) An outward shift in aggregate supply 6. The rapid increase in the price level is defined as ____________ a) Inflation b) Hyperinflation c) Stagflation d) None of above 7. Inflation always reduces the ____________ a) Cost of production b) prices of product c) Reduces the standard of living e) All of the above.
    [Show full text]
  • 5 Conclusions
    as an import barrier than an export subsidy. 5 Conclusions In this paper we assessed the effect of trade policies on external balances by adopting an approach that exploits differences in sectoral specialization and trade costs. To do so, we used (for the most part) data on bilateral trade flows to infer trade costs and sectoral comparative advantage for a globally representative set of countries over varying time periods. We also proposed an effective trade cost measure that weights trade costs by comparative advantage, thereby more accurately capturing costs that pertain to sectors in which countries may have a greater underlying potential to export and import. We found a modestly robust link between effective trade costs and current account outcomes. Thus, countries facing higher effective costs to export tend to have only somewhat lower CA balances, which implies that the overall contribution of trade costs to global imbalances has been small. These results are consistent with previous theoretical predictions suggesting limited effects of trade costs on current account balances. One limitation of this approach is that our estimates could be biased by the potential for causality to instead run from the CA to effective trade costs. Dekle, Eaton, and Kortum (2008) point out that movements in the current account can have general equilibrium effects on sectoral prices and wages, which in turn can have implications for comparative advantage. In the Eaton and Kortum (2002) framework that we adopt, such effects would be eliminated from our comparative advantage measure via the normalization by the country average of absolute advantage (`ala Hanson et al.
    [Show full text]
  • Part II Core Theory: Classic International Trade Theories
    Part II Core Theory: Classic International Trade Theories Table of Contents Part II Core Theory: Classic International Trade Theories.........................2 1. Mercantilism ...........................................................................................2 The Classical World of David Ricardo and Comparative (Chapter 3).......3 Advantage ...................................................................................................3 Absolute Advantage and Comparative Advantage .....................................5 Problems of Using Absolute Advantage to Guide Allocation of Tasks......8 Ricardian Comparative Advantage.............................................................9 Resource Constraints: ...............................................................................18 Complete Specialization: ..........................................................................20 Technological take over by less developed countries...............................21 Production Possibilities: ...........................................................................21 Complete versus Partial Specialization ....................................................23 The case of a small country ......................................................................24 Some concluding observations .................................................................25 2. Extensions and Tests of the Classical Model of Trade (chapter 4).......26 2.1 The classical model in money terms...................................................27
    [Show full text]
  • International Economics Questions Part I Question D
    International Economics questions Part I A nation's ability to produce a product more efficiently than another country is referred to as a. globalization. b. foreign trade. c. interdependence. d. absolute advantage. Question A nation's ability to produce a product more efficiently than another country is referred to as a. globalization. b. foreign trade. c. interdependence. d. absolute advantage. Answer Nebraska specializes in the production of corn and Maine specializes in the production of lobsters, therefore the two states could engage in trade that benefits both parties. This law of economics is known as a. supply and demand. b. parallel consumption. c. comparative advantage. d. relative distribution. Question Nebraska specializes in the production of corn and Maine specializes in the production of lobsters, therefore the two states could engage in trade that benefits both parties. This law of economics is known as a. supply and demand. b. parallel consumption. c. comparative advantage. d. relative distribution. Answer Country X and Country Y are the same size in terms of population, area, and capital stock. If both countries devote all of their efforts to producing widgets, Country X can produce 10 million widgets, while Country Y can produce 5 million. Based on the information given, Country X has a. a monopoly on the production of widgets. b. an absolute advantage in producing widgets. c. a comparative advantage in producing widgets. d. a lower opportunity cost in the production of widgets. Question Country X and Country Y are the same size in terms of population, area, and capital stock. If both countries devote all of their efforts to producing widgets, Country X can produce 10 million widgets, while Country Y can produce 5 million.
    [Show full text]
  • Absolute Advantage Absolute Advantage
    Absolute Advantage Absolute Advantage Two countries: Alpha and Omega. Absolute Advantage Two countries: Alpha and Omega. Two goods: computers and cars. Absolute Advantage Two countries: Alpha and Omega. Two goods: computers and cars. Both goods are produced using labor as the only input. Absolute Advantage Two countries: Alpha and Omega. Two goods: computers and cars. Both goods are produced using labor as the only input. In Alpha, 2 workers = 1 car and 10 workers = 1 computer. Absolute Advantage Two countries: Alpha and Omega. Two goods: computers and cars. Both goods are produced using labor as the only input. In Alpha, 2 workers = 1 car and 10 workers = 1 computer. In Omega, 4 workers = 1 car and 100 workers = 1 computer. Absolute Advantage Two countries: Alpha and Omega. Two goods: computers and cars. Both goods are produced using labor as the only input. In Alpha, 2 workers = 1 car and 10 workers = 1 computer. In Omega, 4 workers = 1 car and 100 workers = 1 computer. Alpha produces both goods more efficiently (i.e., using fewer resources) than Omega. Absolute Advantage Two countries: Alpha and Omega. Two goods: computers and cars. Both goods are produced using labor as the only input. In Alpha, 2 workers = 1 car and 10 workers = 1 computer. In Omega, 4 workers = 1 car and 100 workers = 1 computer. Alpha produces both goods more efficiently (i.e., using fewer resources) than Omega. Alpha has an absolute advantage in the production of both goods relative to Omega. Comparative Advantage in Producing Computers Comparative Advantage in Producing Computers Alpha must give up 5 cars to produce 1 computer: its opportunity cost of producing 1 computer is 5 cars.
    [Show full text]