Which country has a comparative advantage in producing lumberjack shirts? Explain how you know? The US has the advantage by 6 over Canada in producing lumberjack shirts. The graph clearly shows how many shirts are produced for each, and it shows the US with more.
b. Does either country have an absolute advantage in producing both goods? Explain how you know. I am not sure if this is right, but I believe that they do not. Canada produces more boots and less shirts. While the us makes way more shirts and less boots. I would assume that US has 4 advantage total, but not in both products.
c. If both countries are currently producing three pairs of boots and three shirts, explain how they can both be better off if they specialize and engage in trade. They could trade one for the other. One country can make more of one product and less of the other. The other country can do the opposite as well, and then trade and be equal with both products. Like if the US made 10 shirts and Canada made 10 boots. Trade down the middle.
4.14 On page 269
Based on the results in the chart above, how does the quota affect U.S. consumers? It affects it by not allowing the possibility to make more revenue. By having this quota it puts a limit to opportunity and growth. I believe that having a quota is not a wise thing to do in this instance.
Which group gains from the quota? The producer, because they can raise the price with this and make more profit.
PROBLEM 5.3 ON PAGE 270
Define protectionism and discuss who benefits and who loses from protectionist policies. The chapter provides four specific arguments traditionally used to justify these policies. List each of these and explain whether or not you agree that they justify the use of trade...