Exam 3: Interdependence and the Gains From Trade

Table 3-3 Assume that Indonesia and India can switch between producing rice and bananas at a constant rate. -Refer to Table 3-3.India's opportunity cost of producing rice is

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

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

Consider two individuals - Marquis and Serena - each of whom would like to wear sweaters and eat tasty food.The gains from trade between Marquis and Serena are most obvious in which of the following cases?

When two countries trade with one another,it is most likely because

Table 3-8 Assume that Huang and Min can switch between producing parasols and producing porcelain plates at a constant rate. -Refer to Table 3-8.The opportunity cost of 1 plate for Huang is

Figure 3-7 Bintu’s Production Possibilities Frontier Juba’s Production Possibilities Frontier -Refer to Figure 3-7.The opportunity cost of 1 bowl for Bintu is

Table 3-3 Assume that Zimbabwe and Portugal can switch between producing toothbrushes and producing hairbrushes at a constant rate. -Refer to Table 3-3.Assume that Zimbabwe and Portugal each has 60 machine minutes available.Originally,each country divided its time equally between the production of toothbrushes and hairbrushes.Now,each country spends all its time producing the good in which it has a comparative advantage.As a result,the total output increased by

Table 3-4 Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate. -Refer to Table 3-4.Without trade,the farmer produced and consumed 2 pounds of meat and 4 pounds of potatoes and the rancher produced and consumed 4 pounds of meat and 2 pounds of potatoes.Then,each person agreed to specialize in the production of the good in which they have a comparative advantage and trade 3 pounds of meat for 6 pounds of potatoes.As a result,the farmer gained

Table 3-6 Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate. -Refer to Table 3-6.We could use the information in the table to draw a production possibilities frontier for Maya and a second production possibilities frontier for Miguel.If we were to do this,measuring toasters along the horizontal axis,then

Figure 3-2 Peru's Production Possibilities Frontier -Refer to Figure 3-2.If the production possibilities frontier shown is for 40 hours of production,then how long does it take Peru to make one ruby?

Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year,and a worker in Oatland can grow either 20 bushels of corn or 5 bushels of oats per year.There are 20 workers in Cornland and 20 workers in Oatland.Which of the following statements is true?

Table 3-1 Assume that Andia and Zardia can switch between producing wheat and producing beef at a constant rate. -Refer to Table 3-1.What is Andia's opportunity cost of producing one bushel of wheat?

Figure 3-7 Bintu’s Production Possibilities Frontier Juba’s Production Possibilities Frontier -Refer to Figure 3-7.If Bintu and Juba each divides her time equally between making bowls and making cups,then total production is

If Shawn can produce donuts at a lower opportunity cost than Sue,then

Figure 3-8 Chile’s Production Possibilities Frontier Colombia’s Production Possibilities Frontier -Refer to Figure 3-8.Chile would incur an opportunity cost of 36 pounds of coffee if it increased its production of soybeans by

Figure 3-7 Bintu’s Production Possibilities Frontier Juba’s Production Possibilities Frontier -Refer to Figure 3-7.Suppose Juba is willing to trade one bowl to Bintu for every two cups that Bintu makes and sends to Juba.Which of the following combinations of bowls and cups could Bintu then consume,assuming Bintu specializes in making cups and Juba specializes in making bowls?

The principle of comparative advantage does not provide answers to certain questions.One of those questions is

An economy can produce at any point on or inside its production possibilities frontier,but it cannot produce at points outside its production possibilities frontier.

For both parties to gain from trade,the price at which they trade must lie exactly in the middle of the two opportunity costs.