Exam 3: Interdependence and the Gains from Trade

Assume that Greece has a comparative advantage in fish and Germany has a comparative advantage in cars.What will happen if these two countries specialize and trade according to their comparative advantage?

Figure 3-5 These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour. -Refer to Figure 3-5.What is the opportunity cost of one pair of ballet slippers for Fred?

Suppose a gardener produces both green beans and corn in her garden.If the opportunity cost of one bushel of corn is 3/5 bushel of green beans,what is the opportunity cost of 1 bushel of green beans?

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 an absolute advantage in which product?

Figure 3-5 These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour. -Refer to Figure 3-5.What should Ginger and Fred specialize in?

Figure 3-3 Ice cream and cones are measured in kilograms. -Refer to Figure 3-3.What does each of the two producers have an absolute advantage in?

Trade allows a person 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.

What does comparative advantage reflect?

Rusty can edit two pages in one minute,and can type 80 words in one minute.Emily can edit one page in one minute,and can type 100 words in one minute.Rusty has an absolute and comparative advantage in editing,and Emily has an absolute and comparative advantage in typing.

Table 3-3 -Refer to Table 3-3.What does each of the two producers have a comparative advantage in?

Figure 3-5 These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour. -Refer to Figure 3-5.If Fred and Ginger both specialize in the good in which they have a comparative advantage,what would the total production be?

Figure 3-5 These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour. -Refer to Figure 3-5.What is the opportunity cost of one pair of tap shoes for Ginger?

Suppose that a worker in Freedonia can produce either 6 units of corn or 2 units of wheat per year,and a worker in Sylvania can produce either 2 units of corn or 6 units of wheat per year.Each nation has 10 workers.For many years the two countries traded,each completely specializing in producing the grain for which it has a comparative advantage.Now,however,war has broken out between them and all trade has stopped.Without trade,Freedonia produces and consumes 30 units of corn and 10 units of wheat per year.Sylvania produces and consumes 10 units of corn and 30 units of wheat.By how much has the combined yearly output of the two countries declined?

For a country producing two goods,the opportunity cost of one good will be the inverse of the opportunity cost of the other good.

Two countries can achieve gains from trade even if one country has an absolute advantage in the production of both goods.

If there is no trade,which of the following is most likely?

A rancher can produce only hamburgers,while a farmer can produce only French fries.If the rancher and the farmer like both foods,which of the following is most likely?

How is absolute advantage found?

Table 3-2 -Refer to Table 3-2.What is the opportunity cost of 1 kilogram of potatoes for the farmer?

Figure 3-3 Ice cream and cones are measured in kilograms. -Refer to Figure 3-3.Suppose that Ben and Jerry have both decided to produce at point A on their production possibilities frontiers.What can we infer from this information?