Exam 3: Interdependence and the Gains From Trade

Assume for the United States that the opportunity cost of each airplane is 100 cars.Then which of these pairs of points could be on the United States' production possibilities frontier?

The principle of comparative advantage as we know it today was developed by

When each person specializes in producing the good for which he or she has a comparative advantage,each person can gain from trade but total production in the economy is unchanged.

Figure 3-1 -Refer to Figure 3-1.Assume Cliff and Paul were both producing wheat and corn,and each person was dividing his time equally between the two.Then each decides to specialize in the product in which he has a comparative advantage.As a result of this change,total production of corn would

If labor in Mexico is less productive than labor in the United States in all areas of production,

For two individuals who engage in the same two productive activities,it is impossible for one of the two individuals to

When a country has a comparative advantage in producing a certain good,

Adam Smith developed the theory of comparative advantage as we know it today.

Figure 3-5 The graph below represents the various combinations of cars and corn that Country A could produce in a given month. (On the vertical axis, corn is measured in bushels.) -Refer to Figure 3-5.Suppose Country B is willing to trade 40 bushels of corn to Country A for each car that Country A produces and sends to Country B.Which of the following combinations of cars and corn could Country A then consume,assuming Country A specializes in car production?

People generally choose to depend upon others for goods and services.Economists view this interdependence as

Trade allows a country to consume outside its production possibilities frontier.

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,and each country specializes according to the principle of comparative advantage.If Radioland trades 100 televisions to Teeveeland in exchange for 100 radios each year,then each country's maximum consumption of new radios and televisions per year will be

Two individuals engage in the same two productive activities.In which of the following circumstances would neither individual have a comparative advantage in either activity?

If he devotes all of his available resources to cantaloupe production,a farmer can produce 120 cantaloupes.If he sacrifices 1.5 watermelons for each cantaloupe that he produces,it follows that

It takes Russell 6 hours to produce a bushel of corn and 2 hours to wash and polish a car.It takes Wilma 6 hours to produce a bushel of corn and 1 hour to wash and polish a car.Wilma and Russell cannot gain from specialization and trade,since it takes each of them 6 hours to produce 1 bushel of corn.

The fact that economists are generally united in their support of free trade is traceable to

These figures illustrate the production possibilities available to Barney and Betty with 8 hours of labor in their baker Figure 3-4 -Refer to Figure 3-4.Initially,Barney is spending one-half of his time making pies and the other one-half of his time making bread,and Betty is doing the same.Relative to this initial situation,Barney and Betty could specialize according to the principle of comparative advantage,and both could benefit from this new arrangement,provided they agree that one loaf of bread will trade for somewhere between

Figure 3-3 -Refer to Figure 3-3.Fred would incur an opportunity cost of 3 ballet slippers if he

By definition,exports are

Figure 3-1 -Refer to Figure 3-1.Suppose Paul must work 2 hours to produce each bushel of corn.Then Paul's production possibilities frontier is based on how many hours of work?