Exam 3: Interdependence and the Gains From Trade

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?

Suppose that a worker in Agland can produce either 10 units of organic grain or 2 units of incense per year,and a worker in Zenland can produce either 5 units of organic grain or 15 units of incense per year.There are 10 workers in Agland and 20 workers in Zenland.Currently the two countries do not trade.Agland produces and consumes 50 units of grain and 10 units of incense per year.Zenland produces and consumes 100 units of grain and no incense per year.The combined output of the two countries is therefore 150 units of grain and 10 units of incense per year.If the two countries decided to trade and completely specialize in producing the good for which each has a comparative advantage,what would the combined yearly output of the two countries be?

Figure 3-1 -Refer to Figure 3-1.Assume that Cliff and Paul were both producing wheat and corn,and each was dividing their time equally between the two.Then they decide to specialize in the product they have a comparative advantage in.What would happen to the total production of corn?

Figure 3-3 Ice cream and cones are measured in kilograms. -Refer to Figure 3-3.What does each of the two producers have a comparative or absolute advantage in?

Table 3-4 ​ -Refer to the table.What is the opportunity cost of one birdhouse for Manitoba?

Figure 3-3 Ice cream and cones are measured in kilograms. -Refer to Figure 3-3.What does each of the two producers have a comparative or absolute advantage in?

Which statement does NOT accurately outline an implication of our model of trade?

Suppose that a worker in Taiwan can make 2 TVs or 10 pairs of shoes per week,and a worker in Korea can make 3 TVs or 20 pairs of shoes per week. a.In what sense do TVs and shoes cost less in Korea than in Taiwan? b.In what sense do TVs cost less in Taiwan than in Korea? c.If Taiwan and Korea were to engage in trade,which country would export which good? d.How would the answer to the question in part c change if a worker in Korea could make 4 TVs per week?

Using all available resources,if a farmer can produce either 65 cantaloupes or 70 watermelons,what is the opportunity cost of 1 cantaloupe to the farmer?

Figure 3-1 -Refer to Figure 3-1.If Paul divides his time equally between corn and wheat,what will he be able to produce?

Table 3-5 ​ -Refer to Table 3-5.If Japan and Canada open up trade based on the principle of comparative advantage,who loses in the short term in Japan?

Egypt has a comparative advantage in the production of linen and an absolute advantage in the production of beer,compared to Russia.If these two countries decide to trade,what would the pattern of trade be?

Some countries win in international trade,while other countries lose.

Figure 3-6 These figures illustrate the production possibilities available to Barney and Betty with eight hours of labour in their bakery. -Refer to Figure 3-6.Who has an absolute advantage in each product?

According to Adam Smith,what should a person never attempt to make at home?

What did Adam Smith believe about trade?

Which of the following could benefit Canada?

Table 3-6 ​ -Refer to Table 3-5.Which country has a comparative or absolute advantage in each product?

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

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