Exam 3: Interdependence and the Gains From Trade

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,then the opportunity cost of 1 bushel of green beans is

Suppose a gardener produces both green beans and corn in her garden.If she must give up 14 bushels of corn to get 5 bushels of green beans,then her opportunity cost of 1 bushel of green beans is

Figure 3-2 -Refer to Figure 3-2.Originally,Ben was producing at his point A and Jerry was producing at his point A.Then,each person decided to specialize in the product in which he has a comparative advantage.Furthermore,they agreed to trade 4 pounds of cones for 2 pounds of ice cream.As a result of these new arrangements,the gains from trade relative to the original situation are as follows:

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.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.Suppose that trade is then initiated between the two countries,and Freedonia sends 30 units of corn to Sylvania in exchange for 30 units of wheat.Freedonia will now be able to consume a maximum of

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

If it takes U.S.workers fewer hours to produce every good than it takes German workers,the United States cannot gain from trade with Germany.

People who provide you with goods and services

Regan grows flowers and makes ceramic vases.Jayson also grows flowers and makes vases,but Regan is better at producing both.In this case,trade could

Table 3-1 -Refer to Table 3-1.The farmer and the rancher both could benefit if the farmer were to specialize in

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 according to their respective comparative advantages.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.The war has caused the combined yearly output of the two countries to decline by

Comparative advantage is related most closely to which of the following?

Adam Smith asserted that a person should never attempt to make at home

For the following question(s), use the accompanying table. Table 3-2 -Refer to Table 3-2.For Helen,the opportunity cost of 1 dress is

Julia can fix a meal in 1 hour,and her opportunity cost of one hour is $50.Jacque can fix the same kind of meal in 2 hours,and his opportunity cost of one hour is $20.Will both Julia and Jacque be better off if she pays him $45 per meal to fix her meals? Explain.

Figure 3-2 -Refer to Figure 3-2.Jerry has an absolute advantage in

It takes Barbara 3 hours to make a pie and 4 hours to make a shirt.It takes Gary 2 hours to make a pie and 5 hours to make a shirt.Barbara should specialize in making shirts and Gary should specialize in making pies,and they should trade.

Explain the difference between absolute advantage and comparative advantage.Which is more important in determining trade patterns,absolute advantage or comparative advantage? Why?

Suppose Susan can wash three windows per hour or she can iron six shirts per hour.Paul can wash two windows per hour or he can iron five shirts per hour.

The principle of comparative advantage does not provide answers to certain questions.One of those questions is as follows:

Use the accompanying table to answer the following questions: Table 3-6 -Refer to Table 3-6.If England and Spain trade based on the principle of comparative advantage,England will import