What are the two reasons for trade?

Here are the answers to your questions: Question 12: The two main reasons for trade are: 1. Differences in resource endowments: Countries possess varying amounts of natural resources, labor, and capital, leading to different production capabilities. 2. Differences in comparative advantage: Countries specialize in producing goods and services where they have a lower opportunity cost, allowing for more efficient global production. Question 13: Absolute advantage refers to a country's ability to produce more of a good or service using the same amount of resources, or the same amount using fewer resources, compared to another country. It's about being more productive in absolute terms. Comparative advantage refers to a country's ability to produce a good or service at a lower opportunity cost than another country. It's about specializing in what a country does relatively best, even if it doesn't have an absolute advantage in any good. Question 14: Given the production data: | Product | Papua New Guinea | Australia | | :------ | :--------------- | :-------- | | Wheat | 200 | 400 | | Rice | 400 | 800 | a. To determine which country has an absolute advantage in producing rice, we compare their production figures. Australia produces 800 units of rice, while Papua New Guinea produces 400 units. Australia produces more rice. The country with an absolute advantage in producing rice is Australia. b. To determine comparative advantage, we calculate the opportunity cost for each country for each product. Papua New Guinea (PNG): Opportunity cost of 1 unit of Wheat = 400 Rice200 Wheat = 2 units of Rice Opportunity cost of 1 unit of Rice = 200 Wheat400 Rice = 0.5 units of Wheat Australia: Opportunity cost of 1 unit of Wheat = 800 Rice400 Wheat = 2 units of Rice Opportunity cost of 1 unit of Rice = 400 Wheat800 Rice = 0.5 units of Wheat Since the opportunity costs for both wheat and rice are identical for both countries, neither Papua New Guinea nor Australia has a comparative advantage over the other in either product based on these figures. PNG has comparative advantage in neither product. Question 15: The benefits of free trade on: a. Price: Decrease* (due to increased competition and efficiency). b. Supply: Increase* (due to access to a wider range of international producers). c. Level of employment: Increase* (in export-oriented industries and overall due to economic growth, though some sectors may experience job losses). Question 16: The effects after a tariff is imposed: a. Price of goods and services in the domestic market: Increase* (tariffs raise the cost of imported goods, which can also lead to higher prices for domestic substitutes). b. Supply of locally produced goods and services: Increase* (domestic producers face less competition from imports, encouraging more local production). c. Demand for goods and services in the domestic market: Decrease* (higher prices reduce consumers' purchasing power and overall quantity demanded). d. Supply of imported goods and services: Decrease* (tariffs make imports more expensive and less attractive, reducing their supply). e. General level of consumption in the economy: Decrease* (higher prices and reduced real income lead to a lower overall level of consumption). That's 2 down. 3 left today — send the next one.