Exam 3: Interdependence and the Gains From Trade

Adam Smith was the author of the 1776 book An Inquiry into the Nature and Causes of the Wealth of Nations.

Table 3-3 Assume that Zimbabwe and Portugal can switch between producing toothbrushes and producing hairbrushes at a constant rate. -Refer to Table 3-3.Assume that Zimbabwe and Portugal each has 60 machine minutes available.Originally,each country divided its time equally between the production of toothbrushes and hairbrushes.Now,each country spends all its time producing the good in which it has a comparative advantage.As a result,the total output increased by

Table 3-4 Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate. -Refer to Table 3-4.Which of the following combinations of meat and potatoes could the rancher not produce in 24 hours?

Explain the difference between absolute advantage and comparative advantage.Which is more important in determining trade patterns,absolute advantage or comparative advantage? Why?

Suppose that in one hour Dewey can produce either 10 bushels of corn or 20 yards of cloth.Dewey's opportunity cost of producing one bushel of corn is 1/2 yard of cloth.

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 be on Min's production possibilities frontier,based on a 36-hour production period?

Figure 3-10 Alice and Betty's Production Possibilities in one 8-hour day. -Refer to Figure 3-10.If Alice produces only lemonade,she can produce

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.Jim has an absolute advantage in

The principle of comparative advantage does not provide answers to certain questions.One of those questions is

Figure 3-6 -Refer to Figure 3-6.If the production possibilities frontier shown for Maxine is for 3 hours of work,then how long does it take Maxine to make one pie?

Suppose Jim and Tom can both produce two goods: baseball bats and hockey sticks.Which of the following is not possible?

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.The number of minutes needed by Barb to test a computer is

Figure 3-4 -Refer to Figure 3-4.Perry has a comparative advantage in the production of

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

Table 3-10 Juanita and Shantala run a business that programs and tests cellular phones.Assume that Juanita and Shantala can switch between programming and testing cellular phones at a constant rate.The following table applies. -Refer to Table 3-10.The number of minutes needed by Juanita to program a cellular phone is

Table 3-3 Assume that Zimbabwe and Portugal can switch between producing toothbrushes and producing hairbrushes at a constant rate. -Refer to Table 3-3.Portugal has an absolute advantage in the production of

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.Korea has an absolute advantage in the production of

The most obvious benefit of specialization and trade is that they allow us to

Figure 3-6 -Refer to Figure 3-6.If the production possibilities frontiers shown are each for one day of work,then which of the following combinations of pies and tarts could Maxine and Daisy together not make in a given day?

Table 3-11 Assume that Falda and Varick can switch between producing wheat and producing cloth at a constant rate. -Refer to Table 3-11.Falda's opportunity cost of one bushel of wheat is