question 19 Japan and China bo
question 19
Japan and China both produce TVs and shoes. Japan is relativelycapital abundant while China is relatively labor abundant. In thetwo countries, the production of TVs is relatively more capitalintensive compared to the production of shoes. Given the factorendowment theory, Japan:
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Has comparative advantage in the production of shoes. |
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Should specialize in and export TVs |
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Has absolute advantage in the production of shoes |
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Absolute advantage in the production of TVs |
question 20
According to Staffan Linder,
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A nation will export the commodity in which it has an absoluteadvantage. |
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Trade between two countries tends to be most pronounced when thecountries find their per capita income levels to be approximatelythe same |
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Trade between two countries tends to be most pronounced when thecountries experience economies of large-scale production over largeoutput levels |
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Factor prices across ccountries should equalize over time |
Answer:
19. In economics a countries factor endowment is commonlyunderstood as the amount of land,labor,capital,entrepreneurshipthat a country posseses and can exploit for manufacturing.Countrieswith a large endowment of resources tend to be more prosperous thanthose with small endowment, all other things being equal.Thedevelopment of sound institution to access and equitably distributethese resources.however is necessary in order for a country toobtain the greatest benefit from its factor endowment.
Here it is said that japan is a capital abundant nation.And theproduction of TV is more capital intensive.So according to theabove mentioned rules TV manufacturing is more and more profitablein Japan
”SO JAPAN SHOULD SPECIALIZE IN AND EXPORTTVs”
20. LINDERHYPOTHESIS
Linder hypothesis is an economic hypothesis hat posistscountries with similar percapita income will consume similarquality products, and that this should be lead to them trading witheach other.The linder hypothesis suggest countries will specializein the production of certain high quality goods, and will tradethese goods with countries that demand these goods.This theory wasproposed by Stafen Linder in 1961.
So according to the above mentioned reasons the answer is that,”TRADE BETWEENTWO COUNTRIES TENDS TO BE MOST PRONOUNCED WHEN THE COUNTRIES FINDTHEIR PER CAPITA INCOME LEVELS TO BE APROXIMATELY THESAME”
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