Exam 3: Interdependence and the Gains From Trade

Figure 3-4 -Refer to Figure 3-4. For Ben, what is the opportunity cost of one bottle of wine?

Suppose that a worker in Taiwan can make 2 TVs or 10 pairs of shoes per week, and a worker in Korea can make 3 TVs or 20 pairs of shoes per week. a. In what sense do TVs and shoes cost less in Korea than in Taiwan b. In what sense do TVs cost less in Taiwan than in Korea? c. If Taiwan and Korea were to engage in trade, which country would export which good? d. How would the answer to the question in part c change if a worker in Korea could make 4 TVs per week?

-Refer to Table 3-5. If Denmark and Italy trade based on the principle of comparative advantage, which country will export or import each product?

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

Figure 3-6 These figures illustrate the production possibilities available to Barney and Betty with eight hours of labour in their bakery. -Refer to Figure 3-6. What is the opportunity cost of one pie for Betty?

Which of the following is NOT an implication of our model of trade?

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

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 5 televisions per year. Each nation has 100 workers. If Radioland trades 100 televisions to Teeveeland in exchange for 100 radios each year, what is the impact on each country's maximum consumption of new radios and televisions per year?

Egypt has a comparative advantage in the production of linen and an absolute advantage in the production of beer, compared to Russia. If these two countries decide to trade, what would the pattern of trade be?

-Refer to Table 3-5. How could Denmark and Italy benefit?

-Refer to Table 3-5. How could Canada and Japan both benefit?

-Refer to Table 3-5. Which country has an absolute or comparative advantage in each product?

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

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

Suppose a producer requires a smaller quantity of inputs to produce carrots than to produce onions. Is this information sufficient to determine in which good the producer has a comparative advantage?

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?

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

Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 6 tables or 18 chairs, where Sandy can make 5 tables or 25 chairs. Who has an absolute advantage in which product?

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

-Refer to Table 3-1. How could the farmer and rancher both benefit?