Exam 3: Interdependence and the Gains From Trade

Table 3-6 ​ -Refer to Table 3-5.If Denmark and Italy trade based on the principle of comparative advantage,which country will export or import each product?

Table 3-1 -Refer to Table 3-1.How could the farmer and rancher both benefit?

Currently,a farmer can either grow 40 bushels of wheat or 120 bushels of corn per acre.If he were able to trade 70 bushels of corn for 30 bushels of wheat,would he be better off or worse off?

Figure 3-5 These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour. -Refer to Figure 3-5.What is the opportunity cost of one pair of tap shoes for Fred?

Adam Smith developed the theory of comparative advantage as we know it today.

Table 3-5 ​ -Refer to Table 3-5.How could Canada and Japan both benefit?

Which of the following do economists generally support?

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

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

Table 3-2 ​ -Refer to Table 3-2.What does each producer have an absolute or comparative advantage in?

What happens when countries specialize according to their comparative advantage?

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

Which book did David Ricardo write?

Suppose Argentina (A)and Bolivia (B)only trade with each other and they both produce the same two goods: grocery (G)and fish (F).Given its resources,Argentina can produce either 2 units of grocery per day or 1 unit of fish; Bolivia can produce either 5 units of grocery or 4 units of fish. a.Draw the production possibilities frontiers for each country on separate graphs. b.If there were no trade,what would be the local price of fish in each country,measured in units of grocery? c.If trade is allowed,which country will export fish and which country will export grocery (if any)? d.What are the gains from trading a unit of fish if the international price of fish is equal to the average of the local prices in the two countries? e.How are the gains from trade distributed? Comment on your result.

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 and trade 3 bushels of wheat for 3 bushels of corn.What would Cliff now be able to consume?

What is David Ricardo known for?

Mike and Sandy are two woodworkers who both make tables and chairs.In one month,Mike can make 6 tables or 18 chairs,where Sandy can make 5 tables or 25 chairs.Who has a comparative advantage in which product?

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.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.Then suppose that trade is initiated between the two countries,and Freedonia sends 30 units of corn to Sylvania in exchange for 30 units of wheat.What maximum amounts will Freedonia now be able to consume?

Table 3-4 ​ -Refer to the table.Who has a comparative advantage in the production of each good?

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.What is the opportunity cost of one pie for Betty?