Exam 3: Interdependence and the Gains from Trade

Figure 3-2 -Refer to Figure 3-2.Assume that Cliff and Paul were both producing wheat and corn,and both were dividing their time equally between the two.Then they decide to specialize in the product for which they have a comparative advantage and trade 3 bushels of wheat for 3 bushels of corn.What would Cliff now be able to consume?

Figure 3-4 -Refer to Figure 3-4.What does each of the two producers have an absolute advantage in?

Mark is a computer company executive and earns $200 per hour managing the company and promoting its products.His daughter Regan is a high school student and earns $6 per hour helping her grandmother on the farm.Mark's computer is broken.He can repair it himself in one hour.Regan can repair it in 10 hours.Mark has a comparative advantage repairing the computer.

Ann and Jess work for a home cleaning company and they form a team.In each room,there are two broad cleaning areas: floor and windows.Ann can do a floor in 45 minutes and windows in 20 minutes.Jess does floors in 30 minutes and windows in 30 minutes. a.How long does it take to clean an apartment with 4 rooms if Ann takes 2 rooms and Jess takes 2 rooms, assuming that if one finishes earlier she takes a break waiting for the other? b.Later on, they decide that if one finishes earlier she would help the other to finish so that they can move on to another client. How long does it take now to finish? c.After a while, they realize that it is better if one does the floors in all rooms and the other does the windows. How long does it take now?

Table 3-2 -Refer to Table 3-2.What does each producer have an absolute advantage in?

Figure 3-1 -Refer to Figure 3-1.If Paul divides his time equally between corn and wheat,what will he be able to produce?

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

Mike and Sandy are two woodworkers who both make tables and chairs.In one month,Mike can make 4 tables or 20 chairs,where Sandy can make 6 tables or 18 chairs.Who has a comparative advantage in which product?

Figure 3-2 -Refer to Figure 3-2.What do the two producers have an absolute advantage in?

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 for which it has a comparative advantage.If Radioland trades 100 radios to Teeveeland in exchange for 100 televisions each year,what is each country's maximum consumption of new radios and televisions per year?

Which of the following do economists generally support?

What did Adam Smith believe about trade?

Currently,a farmer can either grow 40 bushels of wheat or 120 bushels of corn per acre.If he were able to trade 80 bushels of corn for 30 bushels of wheat,would he be better off or worse off?

Figure 3-3 Ice cream and cones are measured in kilograms. -Refer to Figure 3-3.For Ben,what is the opportunity cost of 1 kg of ice cream?

Suppose that a worker in Agland can produce either 10 units of organic grain or 2 units of incense per year,and a worker in Zenland can produce either 5 units of organic grain or 15 units of incense per year.There are 20 workers in Agland and 10 workers in Zenland.Currently the two countries do not trade.Agland produces and consumes 100 units of grain and 20 units of incense per year.Zenland produces and consumes 50 units of grain and no incense per year.The combined output of the two countries is therefore 150 units of grain and 20 units of incense per year.If the two countries decided to trade and completely specialize in producing the good for which each has a comparative advantage,what would the combined yearly output of the two countries be?

Table 3-5 -Refer to Table 3-5.If Canada and Japan trade based on the principle of comparative advantage,what could Canada gain from exporting a car?

What is the term that means whatever must be given up to obtain an item?

Table 3-4 -Refer to the table.Who has a comparative advantage in the production of each good?

Table 3-6 -Refer to Table 3-5.What is the opportunity cost of one unit of bread in Spain?

Table 3-1 -Refer to Table 3-1.What is the opportunity cost of 1 kg of meat for the rancher?