Exam 3: Interdependence and the Gains From Trade

When can two countries gain from trading two goods?

Table 3-16 Summary of the Gains from Trade -Refer to Table 3-16. The values in the table represent the amounts of lemonade and pizzas that Alice and Betty can produce in one week without and with specialization and trade. What are Alice and Betty's gains from specialization and trade?

Figure 3-9 -Refer to Figure 3-9. If Uzbekistan and Azerbaijan switch from each country dividing its time equally between the production of bolts and nails to each country spending all of its time producing the good in which it has a comparative advantage, then total production will increase by

Table 3-12 -Refer to Table 3-1. Relative to the rancher, the farmer has

Suppose that a worker in Caninia can produce either 2 blankets or 8 meals per day, and a worker in Felinia can produce either 5 blankets or 1 meal per day. Each nation has 10 workers. For many years, the two countries traded, each completely specializing according to their respective comparative advantages. Now war has broken out between them and all trade has stopped. Without trade, Caninia produces and consumes 10 blankets and 40 meals per day and Felinia produces and consumes 25 blankets and 5 meals per day. The war has caused the combined daily output of the two countries to decline by

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. England should specialize in the production of

Figure 3-9 -Refer to Figure 3-9. Suppose Azerbaijan is willing to trade 3 nails to Uzbekistan for every bolt that Uzbekistan makes and sends to Azerbaijan. Which of the following combinations of bolts and nails could Uzbekistan then consume, assuming Uzbekistan specializes in making bolts and Azerbaijan specializes in making nails?

Table 3-17 US and French Production Opportunities Wire (in millions of pallons) Cheere (in millinns of lhs.) US 16 32 Frante 8 4 -Refer to Table 3-17 The opportunity costs for the US and France are as follows:

Figure 3-5 -Refer to Figure 3-5. If Hosne and Merve switch from each person dividing her time equally between the production of purses and wallets to each person spending all of her time producing the good in which she has a comparative advantage, then total production of purses will increase by

For both parties to gain from trade, the price at which they trade must lie between the two opportunity costs.

Suppose Hank and Tony can both produce corn. If Hank's opportunity cost of producing a bushel of corn is 2 bushels of soybeans and Tony's opportunity cost of producing a bushel of corn is 3 bushels of soybeans, then Hank has the comparative advantage in the production of corn.

Timmy can edit 2 pages in one minute and he can type 80 words in one minute. Olivia can edit 1 page in one minute and she can type 100 words in one minute. Timmy has an absolute advantage and a comparative advantage in editing, while Olivia has an absolute advantage and a comparative advantage in typing.

Figure 3-8 -Refer to Figure 3-8. If Chile and Colombia each spends all of its time producing the good in which it has a comparative advantage and the countries agree to trade 7 pounds of coffee for 5 pounds of soybeans, then Chile will consume

Suppose that a worker in Boatland can produce either 5 units of wheat or 25 units of fish per year, and a worker in Farmland can produce either 25 units of wheat or 5 units of fish per year. There are 30 workers in each country. No trade occurs between the two countries. Boatland produces and consumes 75 units of wheat and 375 units of fish per year while Farmland produces and consumes 375 units of wheat and 75 units of fish per year. If trade were to occur, Boatland would trade 90 units of fish to Farmland in exchange for 80 units of wheat. If Boatland now completely specializes in fish production, how many units of fish could it now consume along with the 80 units of imported wheat?

If US workers can produce everything in less time than Mexican workers, it is not possible for the US to gain from trade with Mexico.

Figure 3-5 -Refer to Figure 3-5. Hosne has a comparative advantage in the production of

Which of the following is not a reason people choose to depend on others for goods and services?

For a country producing two goods, the opportunity cost of one good will be the inverse of the opportunity cost of the other good.

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. Japan and Korea would not be able to gain from trade if Korea's opportunity cost of one car changed to

Unless two people who are producing two goods have exactly the same opportunity costs, then one person will have a comparative advantage in one good, and the other person will have a comparative advantage in the other good.