Exam 3: Interdependence and the Gains From Trade

Trade between countries

In most countries today, many goods and services consumed are imported from abroad, and many goods and services produced are exported to foreign customers.

Charlotte can produce pork and beans and can switch between producing them at a constant rate. If it takes her 10 hours to produce a pound of pork and 5 hours to produce a pound of beans, what is her opportunity cost of pork and what is her opportunity cost of beans?

Scenario 3-1 The production possibilities frontiers below show how much Greg and Catherine can each produce in 8 hours of time. Greg's Production Possibilities Catherine's Production Possibilities -Refer to Scenario 3-1. What is Greg's opportunity cost of producing ice cream? Explain how you derived your answer.

Suppose that a worker in Radioland can produce either 4 radios or 1 television per year, and a worker in Teeveeland can produce either 2 radios or 4 televisions per year. Each nation has 100 workers. Also suppose that each country completely specializes in producing the good in which it has a comparative advantage. If Radioland trades 100 radios to Teeveeland in exchange for 100 televisions each year, then each country's maximum consumption of new radios and televisions per year will be

When each person specializes in producing the good in which he or she has a comparative advantage, total production in the economy

Frank can make 20 hot dogs an hour or 10 pints of potato salad an hour. Earnest can make 30 hot dogs an hour or 20 pints of potato salad an hour. Who has the comparative advantage making hot dogs and who has the comparative advantage making potato salad?

Table 3-33 Chris and Tony's Production Opportunities -Refer to Table 3-33 Chris and Tony both produce tomatoes and pasta sauce. The table shows their possible production per month if both work the same number of 8 hour days. Which of the following prices would result in a mutually advantageous trade between Chris and Tony?

Table 3-36 -Refer to Table 3-36. Antigua has an absolute advantage in the production of

Figure 3-20 Canada's Production Possibilities Frontier Mexico's Production Possibilities Frontier -Refer to Figure 3-20. If Canada and Mexico switch from each country dividing its time equally between the production of Good X and Good Y to each country spending all of its time producing the good in which it has a comparative advantage, then total production of Good X will increase by

​Table 3-38 -​Refer to Table 3-38. Iowa and Nebraska can both produce corn and soybeans, and can switch between the production of corn and soybeans at a constant rate. The table illustrates the amount of corn or soybeans each state can produce in one growing season. At which of the following prices would both Iowa and Nebraska be able to gain from trade with each other?

​The production possibilities frontier (PPF) illustrates the combinations of goods that society can consume when trading with other producers.

Table 3-28 Barb and Jim run a business that sets up and tests computers. Assume that Barb and Jim can switch between setting up and testing computers at a constant rate. The following table applies. ​ -Refer to Table 3-28. Barb has an absolute advantage in

Assume that Greece has a comparative advantage in fish and Germany has a comparative advantage in cars. Also assume that Germany has an absolute advantage in both fish and cars. If these two countries specialize and trade so as to maximize the benefits of specialization and trade, then

Table 3-22 Assume that Zimbabwe and Portugal can switch between producing toothbrushes and producing hairbrushes at a constant rate. -Refer to Table 3-22. Zimbabwe's opportunity cost of one hairbrush is

If a country has a lower opportunity cost than its potential trading partner, the country should decide to be self-sufficient.

Table 3-36 -Refer to Table 3-36. What is Antigua's opportunity cost of one umbrella?

Figure 3-6 Maxine's Production Possibilities Frontier Daisy's Production Possibilities Frontier -Refer to Figure 3-6. If the production possibilities frontiers shown are each for one day of work, then which of the following combinations of pies and tarts could Maxine and Daisy together not make in a given day?

Table 3-32 US and French Production Opportunities -Refer to Table 3-32 France has an absolute advantage in the production of

Figure 3-19 Chile's Production Possibilities Frontier Colombia's Production Possibilities Frontier -Refer to Figure 3-19. Chile's opportunity cost of one pound of soybeans is