Tomas E. Sanchez, Jr.

GE273 Microeconomics
Unit 5: Homework Assignment International Trade
Problems: 2.4 Page 64, 4.14 Page 305, 5.3 Page 305
2/25/2016

Problem 2.4 Page 64

2.4
a. Canada has the comparative advantage. Canada produces 6 boots to
the USs 4 boots. Both countries PPF is 3 boots, but the US can only
produce 1 additional boot to Canadas 3 additional boots. As for
lumberjack shirts, the US has the comparative advantage. The US
produces 9 more shirts to Canadas 3 shirts.
b. No, even though the chart may reflect that the US has the absolute
advantage, notice that the US can only produce 4 boots to Canadas 6
boots.
US

Canada

4 Boots = 12 Shirts = 1 Boot = 3 Shirts

1 Shirt
4
4

6 Boots = 6 Shirts = 1 Boot =

12 Shirts = 4 Boots = 1 Shirt = 1/3 Boot

= 1 Boot
12
12

6 Shirts = 6 Boots = 1 Shirt

The US has the comparative advantage of producing Shirts.

Canada has the comparative advantage of producing boots.
If the US concentrated producing shirts and traded 2 shirts for 1 boot (from
Canada) see next page (Red dot on the US graph)
If Canada concentrated on producing boots and traded 1 boot for 2 shirts
(from the US) see next page (Blue dot on the Canadian graph)

Tomas E. Sanchez, Jr.

GE273 Microeconomics
Unit 5: Homework Assignment International Trade
Problems: 2.4 Page 64, 4.14 Page 305, 5.3 Page 305
2/25/2016

Tomas E. Sanchez, Jr.

GE273 Microeconomics
Unit 5: Homework Assignment International Trade
Problems: 2.4 Page 64, 4.14 Page 305, 5.3 Page 305
2/25/2016

World price of kumquats

U.S. price of kumquats
Quantity supplied by U.S. firms
Quantity demanded
Area of consumer surplus
Area of domestic producer surplus
Area of deadweight loss
Problem 4.14, Page 305

Without Quota
$.75
$.75
4 million pounds
13 million pounds
A+B+C+D+E+F
G
No deadweight loss

With Quota
$.75
$1.00
6 million pounds
12 million
pounds
A+B
G+C
D+F

Problem 5.3, Page 305

a. Protectionism is a government action or policy that restricts or
restrains international trade to protect domestic businesses and jobs
from foreign competition.
b. The benefactors are the local businesses who do not have to worry
about competitors from another country, even if the other country
does a better job and producing the product. Inefficient producers of a
product tend to benefit the most.
c. In turn the losers are producers like automobile manufacturers and

computer manufacturers and consumers. For example if a consumer

wants a new car then he/she can only buy a car made in the US for a
high price. Not only can the consumer not afford the car but maybe
the quality of the car is below par and he/she is really not fond or the
style. Without protectionism that same consumer has a vast variety of
cars to choose from plus a vast variety of quality cars to choose from
not to mention a wide price range.