Exam 3: Interdependence and the Gains From Trade

Differences in opportunity cost and comparative advantage allow for gains from trade.

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 -Refer to Table 3-3.The opportunity cost of one aeroplane for the US is:

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:

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 -According to Table 3-4:

Economists' support of trade restrictions is still based largely on the failure of the principle of comparative advantage.

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 3-4 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 -According to Table 3-4:

If one country can produce all goods more cheaply than another, there is no reason to trade.

A person is able to obtain goods at prices that are less than that person's opportunity cost because each person concentrates on the activity for which he or she has the lower opportunity cost.

Jean grows rice at a higher cost than Lee.Suppose Lee catches fish at a higher cost than Jean.They should trade.

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

If a country imports goods from overseas, it will always suffer a reduction in welfare.

Which of the following is correct?

Graph 3-2 These figures illustrate the production possibilities available to Amy and Jim with 8 hours of labour. -Refer to Graph 3-2.The opportunity cost of one doughnut for Jim 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 reduced the labour hours needed for it to produce cheese by 2.5 hours, it would:

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 -Refer to Table 3-3.The opportunity cost of one car for the US is:

Trade can benefit society as a whole because it allows:

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, England will export which product to Spain:

The producer who has the smaller opportunity cost of producing a good is said to have a comparative advantage in producing that good.