Exam 3: Interdependence and the Gains From Trade

Table 3-7 Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate. ​ -Refer to Table 3-7. Which of the following combinations of meat and potatoes could the rancher not produce in 24 hours?

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 5 bushels of corn or 50 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. If the two countries do not trade, Cornland will produce and consume 400 bushels of corn and 100 bushels of oats, while Oatland will produce and consume 60 bushels of corn and 400 bushels of oats. If each country made the decision to specialize in producing the good in which it has a comparative advantage, then the combined yearly output of the two countries would increase by

Table 3-7 Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate. ​ -Refer to Table 3-7. Which of the following combinations of meat and potatoes could the farmer produce in 24 hours?

Table 3-30 Assume that Falda and Varick can switch between producing wheat and producing cloth at a constant rate. -Refer to Table 3-30. Varick has an absolute advantage in the production of

Adam Smith was the author of the 1776 book An Inquiry into the Nature and Causes of the Wealth of Nations.

Which famous economist developed the principle of comparative advantage as we know it today?

Figure 3-18 Bintu's Production Possibilities Frontier Juba's Production Possibilities Frontier -Refer to Figure 3-18. 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?

When there are two people and each is capable of producing two goods, it is possible for one person to have a comparative advantage over the other in both goods.

Figure 3-16 Hosne's Production Possibilities Frontier Merve's Production Possibilities Frontier -Refer to Figure 3-16. If Hosne and Merve switch from each person dividing her time equally between the production of purses and wallets to each person spending all of her time producing the good in which she has a comparative advantage, then total production of purses will increase by

Figure 3-5 Hosne's Production Possibilities Frontier Merve's Production Possibilities Frontier -Refer to Figure 3-5. If Hosne and Merve both spend all of their time making wallets, then total production is

Table 3-37 Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate. -Refer to Table 3-37. Iceland should export

Table 3-26 Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate. ​ -Refer to Table 3-26. Japan's opportunity cost of one car is

Figure 3-18 Bintu's Production Possibilities Frontier Juba's Production Possibilities Frontier -Refer to Figure 3-18. The opportunity cost of 1 bowl for Bintu is

Table 3-9 Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate. ​ -Refer to Table 3-9. Assume that Maya and Miguel each has 60 hours available. If each person divides his/her time equally between the production of mixers and toasters, then total production is

Table 3-21 Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. The following table shows the number of coolers or number of radios each country can produce in one day. -Refer to Table 3-21. Assume that Jamaica and Norway each has 4 days available for production. Originally, each country divided its time equally between the production of coolers and radios. Now, each country spends all its time producing the good in which it has a comparative advantage. As a result, the total output of coolers increased by

Table 3-20 Assume that Brad and Theresa can switch between producing wheat and producing beef at a constant rate. -Refer to Table 3-20. At which of the following prices would both Brad and Theresa gain from trade with each other?

Scenario 3-2 In country A a worker who works 40 hours can produce 200 pounds of rice or 100 pounds of broccoli. In country B a worker who works 40 hours can produce 160 pounds of rice or 120 pounds of broccoli. -Refer to Scenario 3-2. Give a range of prices in terms of pounds of rice per pound of broccoli at which the two countries would be both be willing to trade.

Differences in opportunity cost allow for gains from trade.

Table 3-23 Assume that the farmer and the rancher can switch between producing pork and producing tomatoes at a constant rate. ​ -Refer to Table 3-23. Assume that the farmer and the rancher each has 24 labor hours available. If each person spends all his time producing the good in which he has a comparative advantage and trade takes place at a price of 1 pound of pork for 2 pounds of tomatoes, then

Which of the following is not correct?