suppose Belgium produces only two goods, chocolate and lace. If Belgium has a comparative advantage in lace, a move toward free trade will
a. benefit chocolate workers, harm lace workers in the short run, but benefit the nation as a whole.
b. harm chocolate workers in the short run, benefit lace workers, but benefit the nation as a whole
c. harm chocolate workers in the short run, harm lace workers, but benefit the nation as a whole
D. benefit chocolate workers, harm lace workers in the short run, but harm the nation as a whole.
Is the answer: D
Absolutely not D. Think about why.
It IsA
So Chocolate is good
Lace workers will be affected but the effeminacy will be good
Effeminacy? The nation will become more lady-like? No. And it's not A, either. You've had two guesses. You're on your own now.
No, the correct answer is A: benefit chocolate workers, harm lace workers in the short run, but benefit the nation as a whole.
To understand why, we need to first understand what comparative advantage means. Comparative advantage occurs when a country can produce a good at a lower opportunity cost compared to another country. In this case, Belgium has a comparative advantage in lace, which means it can produce lace more efficiently or at a lower cost than it can produce chocolate.
When there is a move toward free trade, it means that barriers to trade, such as tariffs or quotas, are reduced or eliminated between countries. This allows countries to specialize in producing goods in which they have a comparative advantage and trade with other countries for goods in which they may not have an advantage.
In the context of this question, when Belgium has a comparative advantage in lace and free trade is introduced, it would benefit chocolate workers. The reason is that with free trade, Belgium can now export lace to other countries where it can fetch higher prices due to its comparative advantage. This would increase the demand for lace and create more job opportunities for lace workers in the long run.
However, in the short run, lace workers may experience a negative impact due to increased competition from other countries that also produce lace. This could potentially lead to job losses or lower wages for lace workers. On the other hand, chocolate workers could benefit from free trade if Belgium has a comparative advantage in lace because they would face less competition from other countries in the production of chocolate.
Overall, even though lace workers may face short-term challenges, the nation as a whole would benefit from the move toward free trade as it allows Belgium to specialize in lace production and export it to other countries, leading to economic growth, increased employment opportunities, and overall gains for the economy.