Exam 3: Interdependence and the Gains From Trade

Figure 3-3 Ice cream and cones are measured in kilograms. -Refer to Figure 3-3. Suppose Ben and Jerry were both producing at point A on their production possibilities frontier and then Ben decided he would be willing to trade 4 kg of cones to get 2 kg of ice cream from Jerry. If both decided to specialize in what they had a comparative advantage in and trade, what would be the gains from trade?

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.

-Refer to Table 3-2. What does each producer have a comparative advantage in?

Jonathan can make a birdhouse in three hours. He can make a bird feeder in three hours. The opportunity cost to Jonathan of making a birdhouse is 1/3 bird feeder.

Figure 3-2 -Refer to Figure 3-2. If Paul divides his time equally between corn and wheat, what will he be able to produce?

-Refer to Table 3-5. Which country has a comparative or absolute advantage in each 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 is the opportunity cost of one pair of ballet slippers for Ginger?

Figure 3-2 -Refer to Figure 3-2. What is the opportunity cost of 1 bushel of wheat for Cliff?

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

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?

-Refer to the table. What is the opportunity cost of one basket for Manitoba?

What is comparative advantage based on?

-Refer to Table 3-5. What is the opportunity cost of one airplane for Japan?

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?

-Refer to Table 3-5. If Japan and Canada open up trade based on the principle of comparative advantage, who loses in the short term in Canada?

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

-Refer to the table. What is the opportunity cost of one birdhouse for Alberta?

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?

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 a comparative advantage in which product?

Refer to Table 3-5. If Canada and Japan trade based on the principle of comparative advantage, at what price would the two countries trade?