Exam 3: Interdependence and the Gains From Trade

Table 3-1 Labour hours needed to make 1 of: Kgs produced in 20 hours: Meat Potatoes Meat Potatoes Potato farmer 10 5 2 4 Zattle farmer 4 1 5 20 -According to Table 3-1:

David Ricardo:

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

Suppose Aaron can build a table in three days and clean a house in one hour, while Jack can clean a house in three hours but it only takes him one day to build a table.Jack has an absolute advantage over Aaron.

David Ricardo developed the theory of imports and exports, as we know them today.

Why do countries outsource their jobs to other countries? Give an example to help explain why this might occur.

Table 3-4 Labour hours needed to make one unit of: Amount Produced in 40 hours: Cheese Bread Cheese Bread England 3 2 13.3 20 Spain 1 5 40 8 -Refer to Table 3-4.The opportunity cost of one unit of cheese in England is:

Table 3-4 Labour hours needed to make one unit of: Amount Produced in 40 hours: Cheese Bread Cheese Bread England 3 2 13.3 20 Spain 1 5 40 8 -Refer to Table 3-4.If England and Spain trade according to the principle of comparative advantage, Spain will export which product to England?

Table 3-3 Hours needed to make one unit of: Amount produced in 2400 hours: Cars Aeroplanes Cars Aeroplanes US 40 160 60 15 Europe 50 150 48 16 -According to Table 3-3:

Suppose it takes Jean four hours to catch 10 fish and one hour to collect one kilogram of mushrooms.It takes Lee four hours to catch 10 fish and 30 minutes to collect 1 kg of mushrooms.Lee should specialise in catching fish and Jean should specialise in collecting mushrooms.

David Ricardo was the author of:

Two individuals or two nations can benefit from trade even if one country has an absolute advantage over the other in producing all goods.

Mark can cook dinner in 30 minutes and wash the laundry in 20 minutes while his housemate John can cook dinner in 15 minutes and wash the laundry in 30 minutes.How should they allocate their work?

Table 3-1 Labour hours needed to make 1 of: Kgs produced in 20 hours: Meat Potatoes Meat Potatoes Potato farmer 10 5 2 4 Zattle farmer 4 1 5 20 -According to Table 3-1:

Graph 3-2 These figures illustrate the production possibilities available to Amy and Jim with 8 hours of labour. -According to Graph 3-2:

Which is more important in determining trade patterns, absolute advantage or comparative advantage? Why?

Table 3-2 Labour hours needed to produce one unit of: Amount produced in 60 hours: Butter (kg) Butter (kg Rice (kg) Rice (kg) Lee 6 10 15 4 John 3 20 15 4 -According to Table 3-2:

Table 3-1 Labour hours needed to make 1 of: Kgs produced in 20 hours: Meat Potatoes Meat Potatoes Potato farmer 10 5 2 4 Zattle farmer 4 1 5 20 -According to Table 3-1:

Exports arise because:

Shaquille can score 32 points or produce 12 rebounds in one game.Karl can score three points or produce one rebound in one game.Shaquille has both an absolute and a comparative advantage in both scoring and rebounding.