Exam 3: Interdependence and the Gains From Trade

Scenario 3-2 In country A a worker who works 40 hours can produce 200 pounds of rice or 100 pounds of broccoli. In country B a worker who works 40 hours can produce 160 pounds of rice or 120 pounds of broccoli. -Refer to Scenario 3-2. Give a range of prices in terms of pounds of rice per pound of broccoli at which the two countries would be both be willing to trade.

Table 3-21 Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. The following table shows the number of coolers or number of radios each country can produce in one day. -Refer to Table 3-21. Jamaica has an absolute advantage in the production of

As a student, Anne spends 40 hours per week writing term papers and completing homework assignments. On one axis of her production possibilities frontier is measured the number of term papers written per week. On the other axis is measured the number of homework assignments completed per week. Anne's production possibilities frontier is a straight line if

Table 3-26 Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate. -Refer to Table 3-26. Korea has an absolute advantage 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.

An assumption of the production possibilities frontier model is that technology is fixed.

Production possibilities frontiers cannot be used to illustrate tradeoffs.

Table 3-5 Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate. -Refer to Table 3-5. Assume that Aruba and Iceland each has 80 labor hours available. If each country divides its time equally between the production of coolers and radios, then total production is

Figure 3-15 Perry's Production Possibilities Frontier Jordan's Production Possibilities Frontier -Refer to Figure 3-15. Perry has a comparative advantage in the production of

Table 3-34 Assume that Indonesia and India can switch between producing rice and bananas at a constant rate. -Refer to Table 3-34. India's opportunity cost of producing rice is

Table 3-26 Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate. -Refer to Table 3-26. Without trade, Japan produced and consumed 50 cars and 6 airplanes and Korea produced and consumed 27 cars and 7 airplanes. Then, each country agreed to specialize in the production of the good in which it has a comparative advantage and trade 28 cars for 8 airplanes. As a result, Japan gained

Table 3-4 Assume that Andrea and Paul can switch between producing wheat and producing beef at a constant rate. -Refer to Table 3-4. Assume that Andrea and Paul each has 480 minutes available. If each person divides his time equally between the production of wheat and beef, then total production is

Table 3-25 Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate. -Refer to Table 3-25. The opportunity cost of 1 toaster for Miguel is

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

Table 3-28 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 3-28. Barb's opportunity cost of testing one computer is setting up

Table 3-39 Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate. -Refer to Table 3-39. Korea should specialize in the production of

Figure 3-14 Arturo's Production Possibilities Frontier Dina's Production Possibilities Frontier -Refer to Figure 3-14. Arturo and Dina would not be able to gain from trade if Dina's opportunity cost of one taco changed to

Table 3-15 -Refer to Table 3-15. Assume that the farmer and the rancher each has 40 labor hours available. If each person divides his time equally between the production of meat and potatoes, then total production is

In most countries today, many goods and services consumed are imported from abroad, and many goods and services produced are exported to foreign customers.

Under what conditions is an economy's production possibilities frontier also its consumption possibilities frontier?