Exam 2: The Power of Trade and Comparative Advantage

Use the following to answer questions: Table: Production Possibilities for Italy and Belgium Labor Hours Needed to Make One Pound of: Pounds produced in hours: Linen Pasta Linen Pasta Italy 10 4 4 10 Belgium 2 8 20 5 -(Table: Production Possibilities for Italy and Belgium) According to the table on production possibilities for Italy and Belgium, Belgium should specialize in linen production because it:

The theory of comparative advantage is:

Two persons each produce two identical goods. Which of the following is true about their absolute and comparative advantages in the production of these two goods?

When a rich country that has absolute advantages in all products begins trading with a poor country:

Specializing in one's comparative advantage and trading with others will make individuals better off, but may not make countries better off.

International trade is based on the theory of absolute advantage.

In his prime, Michael Jordan played both professional basketball and professional baseball. Compared with most people, Jordan would have an absolute advantage in:

Iceland produces two goods: Viking hats (Y) and fish (X). Its production possibilities frontier is characterized as: Y = 50 - 2X and tells us that the opportunity cost of catching (producing) an additional unit of fish in Iceland is:

The ______ shows all combinations of goods that a country can produce given its productivity and ______.

Use the following to answer question: Table: Production in France and Italy Labor units required to produce: One Bag of Truffles One Pair of Wool Socks France 1 1 Italy 2 4 -(Table: Production in France and Italy) According to the table, France should specialize in producing ________, and Italy should specialize in producing _______.

Jack and Jill work at a bakery. In one hour, Jack can decorate either 5 ice-cream cakes or 2 wedding cakes. In one hour, Jill can decorate either 4 ice-cream cakes or 1 wedding cake. According to this scenario, which of the following outcomes will benefit both Jack and Jill the most?

Trade creates value because:

The opportunity cost of producing a particular good refers to:

A production possibilities frontier shows:

Use the following to answer questions: Figure: Countries A and B -(Figure: Countries A and B) Refer to the figure regarding countries A and B. Assume that each country begins by allocating half its labor force to the production of each good. Through trade with each other, each country could increase its consumption of both goods if Country A moved part of its labor force to the production of Good _____ and Country B moved part of its labor force to the production of Good _____.

Use the following to answer questions: Figure: Rice and Shirts -(Figure: Rice and Shirts) Use the PPFs shown for the United States and India. If the United States and India specialize and trade, one country will trade away 20 pounds of rice in exchange for 20 shirts from the other. Compared with no trade, ______ will be able to consume ______ additional shirts, and _____ will be able to consume an additional ______ pounds of rice.

Conan O'Brien hosts the Conan show and Andy Richter, his sidekick, writes for it. Conan needs 4 hours to rehearse and host a good show. It takes Andy 10 hours to do the same. Conan writes one usable joke in an hour, but Andy needs 2 hours to do the same. Conan's opportunity cost of rehearsing and hosting a show is:

Adam Smith:

Babe Ruth could produce two home runs in a week of play as a fielder or one win in a week of play as a pitcher. What was his opportunity cost of a week of fielding?

Use the following to answer questions: Table: Production Possibilities for Kenya and Sri Lanka Beans (millions of tons) Tea (millions of tons) Kenya 100 200 Sri Lanka 150 450 -(Table: Production Possibilities for Kenya and Sri Lanka) According to the table on production possibilities for Kenya and Sri Lanka, Kenya's opportunity cost of producing beans is ________, while Sri Lanka's opportunity cost of producing beans is _________.