Exam 3: Interdependence and the Gains From Trade

Who developed the principle of comparative advantage?

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

-Refer to Table 3-5. If Japan and Canada open up trade based on the principle of comparative advantage, who loses in the short term in Japan?

Suppose that a worker in Agland can produce either 10 units of organic grain or 2 units of incense per year, and a worker in Zenland can produce either 5 units of organic grain or 15 units of incense per year. There are 10 workers in Agland and 20 workers in Zenland. Currently the two countries do not trade. Agland produces and consumes 50 units of grain and 10 units of incense per year. Zenland produces and consumes 100 units of grain and no incense per year. The combined output of the two countries is therefore 150 units of grain and 10 units of incense per year. If the two countries decided to trade and completely specialize in producing the good for which each has a comparative advantage, what would the combined yearly output of the two countries be?

Which of the following does trade NOT allow for?

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?

Suppose a gardener produces both green beans and corn in her garden. If she must give up 20 bushels of corn to get 4 bushels of green beans, what is the opportunity cost of 1 bushel of green beans?

Figure 3-2 -Refer to Figure 3-2. Assume that both Paul and Cliff divide their time equally between the production of corn and wheat, and they do not trade. If they were the only producers of corn and wheat, what would the total production of wheat and corn be?

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

-Refer to the table. What is the opportunity cost of one sled for Winter?

Two countries can achieve gains from trade even if one country has an absolute advantage in the production of both goods.

Goods produced abroad and sold domestically are called exports and goods produced domestically and sold abroad are called imports.

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

Figure 3-1 -Refer to Figure 3-1. What do the two producers have a comparative advantage in?

Figure 3-3 Ice cream and cones are measured in kilograms. -Refer to Figure 3-3. For Jerry, what is the opportunity cost of 1 kg of ice cream?

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

-Refer to Table 3-6. What is the opportunity cost of one unit of bread in Italy?

Dylan can edit two pages in one minute and can type 60 words in one minute. Emily can edit one page in one minute and can type 80 words in one minute. Dylan has an absolute and comparative advantage in editing, and Emily has an absolute and comparative advantage in typing.

-Refer to Table 3-1. What does each producer have a comparative advantage in?

-Refer to Table 3-6. Which country has an absolute or comparative advantage in each product?