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.What would happen to the production of corn?

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

What is the term for a good that is produced abroad and sold domestically?

Table 3-1 -Refer to Table 3-1.What is the opportunity cost of 1 kg of meat for the farmer?

Differences in opportunity cost allow for gains from trade.

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