Exam 3: Interdependence and the Gains From Trade

Which book did David Ricardo write?

-Refer to Table 3-1. What does each producer have an absolute advantage in?

-Refer to Table 3-3. What is the opportunity cost of one coat for Courtney?

-Refer to Table 3-3. What is the opportunity cost of one sweater for Maria?

-Refer to Table 3-5. What is the opportunity cost of one airplane for Canada?

-Refer to Table 3-5. What is the opportunity cost of one car for Japan?

What are imports?

Tracy can fix a meal in one hour, and her opportunity cost of one hour is $40. Michel can fix the same kind of meal in two hours, and his opportunity cost of one hour is $15. Will both Tracy and Michel be better off if she pays him $35 per meal to fix her meals? Explain.

-Refer to Table 3-1. How could the farmer and rancher both benefit?

Figure 3-4 -Refer to Figure 3-4. For Jerry, what is the opportunity cost of one bottle of wine?

Antonio and Elyse are two woodworkers who both make kitchen cabinets and bathroom vanities. In one month, Antonio can make 12 kitchen cabinets or 36 bathroom vanities, where Elyse can make 10 kitchen cabinets or 50 bathroom vanities. What is the opportunity cost of 1 kitchen cabinet?

-Refer to Table 3-5. If Canada and Japan trade based on the principle of comparative advantage, what could Canada gain from importing a car?

Which of the following is NOT an implication of our model of trade?

The only two countries in the world, Alpha and Omega, face the following production possibilities frontiers. Figure 3-7 a. Assume that each country decides to use half of its resources in the production of each good. Show these points on the graphs for each country as point A. b. If these countries choose not to trade, what would be the total world production of popcorn and peanuts? c. Now suppose that each country decides to specialize in the good in which each has a comparative advantage. By specializing, what is the total world production of each product now? d. If each country decides to trade 100 units of popcorn for 100 units of peanuts, show on the graphs the gain each country would receive from trade. Label these points B.

Figure 3-4 -Refer to Figure 3-4. What does each of the two producers have a comparative or absolute advantage in?

Figure 3-3 Ice cream and cones are measured in kilograms. -Refer to Figure 3-3. What does each of the two producers have a comparative or absolute advantage in?

-Refer to Table 3-6. Denmark and Italy trade according to the principle of comparative advantage. If the international price of bread is 2.5 units of cheese for 1 unit of bread, what is the gain from trade to Italy per unit of bread traded?

Figure 3-2 -Refer to Figure 3-2. What do the two producers have an absolute advantage in?

-Refer to Table 3-5. Which country has an absolute advantage in each product?

Both Canada and the U.S. can produce equally tasty maple syrup. What determines which country will export maple syrup?