There are two countries, Fiji and New Zealand. Both produce glass and pottery. A
ID: 1142304 • Letter: T
Question
There are two countries, Fiji and New Zealand. Both produce glass and pottery. Assume New Zealand has a comparative advantage in glass production. Thus, the autarkic price ratios in both countries are such that PGlassNZ/PPotteryNZ> PGlassFiji/PPotteryFiji- OPGlassNZ/PPotteryNZ PGlassFiji/PPotteryFiji- PGlassNZ/PPotteryNZ PGlassFiji/PPotteryFiji. QUESTION 18 10 points Save Answer Use the same information as in the previous equation. Assume that trade takes place between the two countries, that transportation costs are zero, and that there are no regulations or taxes that affect trade in either country. Then, with trade, PGlassNZ/PPotteryNZ> PGlassFiji/PPotteryFiji- O PGlassNZ/PPotteryNZ PGlassFiji/PPotteryFiji O PGlassNZ/PPotteryNZ PGlassFiji/PPotteryFiji. QUESTION 19 10 points Saved Using the same information as in the previous two questions, once trade occurs, New Zealand will produce more pottery and less glass. Both countries will consume at points beyond their PPF Both countries will produce at points beyond their PPF All of the above O QUESTION 20 10 points Saved Use the same information from the previous three questions. Assume that New Zealand is considering imposing a tariff on all imports from Fiji. Which parties in New Zealand are most likely to oppose the tariff? Producers of pottery Producers of glass. People who want to raise government revenue. O None of the above.Explanation / Answer
17) second option is correct.
The country which has comparative advantage in the good has lower opportunity cost or relative price of that good. Thus relative price of glass in new Zealand is lower than that in Fiji
18) third option is correct
With free trade price ratio in both countries become equal.
19) second option is correct
Consumption possibilities increase after specialisation meaning consumtion bundle is beyond the PPF.
20) last option is correct
With imposition of tax, only consumers are going to hurt and oppose.