Exam 3: Interdependence and the Gains From Trade

Table 3-3 -Refer to Table 3-3. If the US and Europe trade according to the principle of comparative advantage, Europe will export what product to the US?

Table 3-4 -According to Table 3-4:

One reason trade benefits both parties is that it allows each to specialise in what they do better.

The reason most people provide you with goods and services is because:

If two countries have identical opportunity costs, then:

Table 3-2 -According to Table 3-2:

George and Martha face the production possibilities frontiers shown for brownies and cupcakes. a. If George and Martha choose not to trade and divide their time equally between the production of brownies and cupcakes, how many of each would they be able to consume? (Show this point on your graphs.) b. Now assume that George and Martha each decide to specialise in the good in which they have a comparative advantage and then trade. Who would trade brownies and who would trade cupcakes? c. If George and Martha decided to trade 60 brownies for 60 cupcakes, how many cupcakes and brownies would each have to consume? d. How do we know each is better off with trade than acting alone?

Table 3-4 -Refer to Table 3-4. The opportunity cost of one unit of cheese in England is:

What factors might economists take into account when advising the Australian government on international trade?

If it takes Australian workers fewer hours to produce every good than it takes Malaysian workers, Australia cannot gain from trade with Malaysia.