Exam 3: Interdependence and the Gains From Trade

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. If Radioland trades 100 televisions to Teeveeland in exchange for 100 radios each year, what is the impact on each country's maximum consumption of new radios and televisions per year?

Figure 3-4 -Refer to Figure 3-4. For Jerry, what is the opportunity cost of 1 bottle of beer?

Table 3-5 -Refer to Table 3-5. What is the opportunity cost of 1 car for Japan?

Table 3-5 -Refer to Table 3-5. If Japan and Canada trade based on the principle of comparative advantage, which of the following is correct?

What should a country do if it has a comparative advantage in a product?

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.

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.

Figure 3-4 -Refer to Figure 3-4. For Ben, what is the opportunity cost of 1 bottle of wine?

Figure 3-4 -Refer to Figure 3-4. Which of the following is correct?

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 10 workers in each country. No trade occurs between the two countries. Boatland produces and consumes 25 units of wheat and 125 units of fish per year while Farmland produces and consumes 125 units of wheat and 25 units of fish per year. If trade were to occur, Boatland would trade 100 units of fish to Farmland in exchange for 100 units of wheat. If Boatland no longer grew any of its own wheat, how many units of fish could it now consume along with the 100 units of imported wheat?

Table 3-6 -Refer to Table 3-6. If England and Spain trade based on the principle of comparative advantage, which of the following is correct?

What are imports?

Figure 3-2 -Refer to Figure 3-2. Assume that Cliff and Paul were both producing wheat and corn, and both were dividing their time equally between the two. Then they decide to specialize in the product for which they have a comparative advantage and trade 3 bushels of wheat for 3 bushels of corn. What would Cliff now be able to consume?

For a country producing 2 goods, the opportunity cost of one good will be the inverse of the opportunity cost of the other good.

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

Table 3-6 -Refer to Table 3-6. Which of the following is correct?

If it takes Canadian workers fewer hours to produce every good than it takes German workers, Canada cannot gain from trade with Germany.

What do economists generally support?

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

Mike and Sandy are two woodworkers who both make tables and chairs. In 1 month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. What is the opportunity cost of 1 table?