Exam 3: Interdependence and the Gains From Trade

Figure 3-7 -Refer to Figure 3-7. If Bintu and Juba each divides her time equally between making bowls and making cups, then total production is

Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 5 bushels of corn or 50 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. If the two countries do not trade, Cornland will produce and consume 400 bushels of corn and 100 bushels of oats, while Oatland will produce and consume 60 bushels of corn and 400 bushels of oats. If each country made the decision to specialize in producing the good in which it has a comparative advantage, then the combined yearly output of the two countries would increase by

Figure 3-9 -Refer to Figure 3-9. Uzbekistan should specialize in the production of

For both parties to gain from trade, the price at which they trade must lie exactly in the middle of the two opportunity costs.

Table 3-8 Assume that Huang and Min can switch between producing parasols and producing porcelain plates at a constant rate. -Refer to Table 3-8. The opportunity cost of 1 plate for Min is

It is possible for the U.S. to gain from trade with Germany even if it takes U.S. workers fewer hours to produce every good than it takes German workers.

Differences in opportunity cost allow for gains from trade.

The production possibilities frontier shows the trade-offs that the producer faces but does not identify the choice the producer will make.

Figure 3-10 -Refer to Figure 3-10. If Alice produces only lemonade, she can produce

Figure 3-11 The graph below represents the various combinations of ham and cheese (in pounds) that the nation of Bonovia could produce in a given month. -Refer to Figure 3-11. If the production possibilities frontier shown is for 240 hours of production, then which of the following combinations of ham and cheese could Bonovia produce in 240 hours?

Table 3-7 Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate. -Refer to Table 3-7. Suppose Korea decides to increase its production of cars by 18. What is the opportunity cost of this decision?

Table 3-6 Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate. -Refer to Table 3-6. Maya has an absolute advantage in the production of

Figure 3-9 -Refer to Figure 3-9. If the production possibilities frontiers shown are each for two days of production, then which of the following combinations of bolts and nails could Uzbekistan and Azerbaijan together make in a given 2-day production period?

Table 3-9 Barb and Jim run a business that sets up and tests computers. Assume that Barb and Jim can switch between setting up and testing computers at a constant rate. The following table applies. -Refer to Table 3-9. Which of the following points would not be on Jim's production possibilities frontier, based on a 40-hour week?

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

Table 3-8 Assume that Huang and Min can switch between producing parasols and producing porcelain plates at a constant rate. -Refer to Table 3-8. Which of the following points would not be on Huang's production possibilities frontier, based on a 36-hour production period?

Table 3-5 Assume that England and Spain can switch between producing cheese and producing bread at a constant rate. -Refer to Table 3-5. At which of the following prices would both England and Spain gain from trade with each other?

Table 3-12 -Refer to Table 3-1. Relative to the rancher, the farmer has a comparative advantage in the production of

Figure 3-1 -Refer to Figure 3-1. The rate of tradeoff between producing chairs and producing couches depends on how many chairs and couches are being produced in

Assume for Namibia that the opportunity cost of each hut is 200 bowls. Which of these pairs of points could be on Namibia's production possibilities frontier?