Q5. Suppose there are two island nations: Micronesia and Macronesia. You advise

Question

Q5. Suppose there are two island nations: Micronesia and Macronesia. You advise the Queen of Macronesia on trade policy. The queen claims that Macronesia has no need for trade with Micronesia because Macronesia is a much larger island and can produce more of every good than Micronesia a) Is the Queen's argument against trade based upon nation size correct under any circumstances?Explain why or why not b) Are there any circumstances in which it is impossible for both Micronesia and Macronesia to gain from trade? 9 c) If so, identify the necessary conditions

Explanation / Answer

The Queens argument is not correct because trade of goods depends on which island has comparative advantage in the production of a particular goods. Yes, if macronesia has comparative advantage in all the goods for trade. Necessary condition is that there is only one factor of production.

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.