Exam 3: Interdependence and the Gains From Trade: Part A

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Figure 3-26 Mary's Production Possibilities Frontier Kate's Production Possibilities Frontier -Refer to Figure 3-26.If Mary and Kate trade foods with each other,who will trade away muffins in exchange for cookies?

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Question 1

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Because Mary has a comparative advantage in making muffins, she will make muffins and exchange them for cookies that Kate makes.

What does a consumption possibilities frontier represent?

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Question 2

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The combinations of output that an economy can consume.

The only two countries in the world,Alpha and Omega,face the following production possibilities frontiers. a.Assume that each country decides to use half of its resources in the production of each good.Show these points on the graphs for each country as point A. b.If these countries choose not to trade,what would be the total world production of popcorn and peanuts? c.Now suppose that each country decides to specialize in the good in which each has a comparative advantage.By specializing,what is the total world production of each product now? d.If each country decides to trade 100 units of popcorn for 100 units of peanuts,show on the graphs the gain each country would receive from trade.Label these points B.

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Question 3

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a. Alpha would be producing 125 units of peanuts and 75 units of popcorn (point A on its production possibilities frontier) and Omega would be producing 50 units of peanuts and 150 units of popcorn (point A on its production possibilities frontier).
b. The total world production of peanuts would be 175 units and the total world production of popcorn would be 225 units.
c. The total world production of peanuts would now be 250 units and the total world production of popcorn would now be 300 units.
d. Alpha would be producing 250 units of peanuts and would trade 100 of them to Omega, leaving Alpha with 150 units of peanuts. Alpha would then receive 100 units of popcorn from Omega. Omega would be producing 300 units of popcorn and would trade 100 of them to Alpha, leaving Omega with 200 units of popcorn. Omega would then receive 100 units of peanuts from Alpha.

What does a production possibilities frontier represent?

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Question 4

Scenario 3-1 The production possibilities frontiers below show how much Greg and Catherine can each produce in 8 hours of time. Greg's Production Possibilities Catherine's Production Possibilities -Refer to Scenario 3-1.Is it possible for Greg and Catherine to gain from trade? Defend your answer.

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Question 5

Suppose that Venezuela produces beef and oil and it can switch production between each at a constant rate.If the most beef it can produce is 300 million pounds and the most oil it can produce is 50 million barrels,then what is the opportunity cost of a pound of beef and what is the opportunity cost of a barrel of oil?

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Question 6

Tom's opportunity cost of mowing a lawn is 2 loads of laundry.Jen's opportunity cost of mowing a lawn is 1.5 loads of laundry.What is the range of prices for mowing a lawn at which Tom and Jen could both benefit from trade?

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Question 7

If the U.S.could produce 5 televisions per hour of labor and China could produce 3 televisions per hour of labor,would it necessarily follow that the U.S.should specialize in television production? Explain your answer using the concepts of comparative and or absolute advantage.

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Question 8

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.Which country,if either,has an absolute advantage producing broccoli? Defend your answer.

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Question 9

Figure 3-26 Mary's Production Possibilities Frontier Kate's Production Possibilities Frontier -Refer to Figure 3-26.What is Kate's opportunity cost of one muffin?

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Question 10

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.Which country,if either,has a comparative advantage producing rice? Defend your answer using the numbers given.

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Question 11

Figure 3-26 Mary's Production Possibilities Frontier Kate's Production Possibilities Frontier -Refer to Figure 3-26.What is Kate's opportunity cost of one cookie?

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Question 12

Economists use the term ------ to refer to the ability to produce a good using fewer inputs than another producer.

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Question 13

Figure 3-26 Mary's Production Possibilities Frontier Kate's Production Possibilities Frontier -Refer to Figure 3-26.What is Mary's opportunity cost of one cookie?

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Question 14

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.Which country,if either,has an absolute advantage producing rice? Defend your answer.

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Question 15

The gains from specialization and trade are based on ------ advantage.

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Question 16

Julia can fix a meal in 1 hour,and her opportunity cost of one hour is $50.Jacque can fix the same kind of meal in 2 hours,and his opportunity cost of one hour is $20.Will both Julia and Jacque be better off if she pays him $45 per meal to fix her meals? Explain.

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Question 17

Scenario 3-1 The production possibilities frontiers below show how much Greg and Catherine can each produce in 8 hours of time. Greg's Production Possibilities Catherine's Production Possibilities -Refer to Scenario 3-1.What is Catherine's opportunity cost of producing cake? Explain how you derived your answer.

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Question 18

Scenario 3-1 The production possibilities frontiers below show how much Greg and Catherine can each produce in 8 hours of time. Greg's Production Possibilities Catherine's Production Possibilities -Refer to Scenario 3-1.What is Catherine's opportunity cost of producing ice cream? Explain how you derived your answer.

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Question 19

Economists use the term ------ to refer to the ability to produce a good at a lower opportunity cost than another producer.

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Question 20

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Exam 3: Interdependence and the Gains From Trade: Part A

Figure 3-26 Mary's Production Possibilities Frontier Kate's Production Possibilities Frontier -Refer to Figure 3-26.If Mary and Kate trade foods with each other,who will trade away muffins in exchange for cookies?

What does a consumption possibilities frontier represent?

What does a production possibilities frontier represent?

Scenario 3-1 The production possibilities frontiers below show how much Greg and Catherine can each produce in 8 hours of time. Greg's Production Possibilities Catherine's Production Possibilities -Refer to Scenario 3-1.Is it possible for Greg and Catherine to gain from trade? Defend your answer.

Tom's opportunity cost of mowing a lawn is 2 loads of laundry.Jen's opportunity cost of mowing a lawn is 1.5 loads of laundry.What is the range of prices for mowing a lawn at which Tom and Jen could both benefit from trade?

If the U.S.could produce 5 televisions per hour of labor and China could produce 3 televisions per hour of labor,would it necessarily follow that the U.S.should specialize in television production? Explain your answer using the concepts of comparative and or absolute advantage.

Figure 3-26 Mary's Production Possibilities Frontier Kate's Production Possibilities Frontier -Refer to Figure 3-26.What is Kate's opportunity cost of one muffin?

Figure 3-26 Mary's Production Possibilities Frontier Kate's Production Possibilities Frontier -Refer to Figure 3-26.What is Kate's opportunity cost of one cookie?

Economists use the term ------ to refer to the ability to produce a good using fewer inputs than another producer.

Figure 3-26 Mary's Production Possibilities Frontier Kate's Production Possibilities Frontier -Refer to Figure 3-26.What is Mary's opportunity cost of one cookie?

The gains from specialization and trade are based on ------ advantage.

Julia can fix a meal in 1 hour,and her opportunity cost of one hour is $50.Jacque can fix the same kind of meal in 2 hours,and his opportunity cost of one hour is $20.Will both Julia and Jacque be better off if she pays him $45 per meal to fix her meals? Explain.

Economists use the term ------ to refer to the ability to produce a good at a lower opportunity cost than another producer.

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion

Application International Trade: Part A

Application International Trade: Part B

Measuring a Nations Income

Measuring a Nations Income: The Economy's Income and Expenditure

Measuring a Nations Income: The Measurement of GDP

Measuring a Nations Income: The Components of GDP

Measuring a Nations Income: Real Versus Nominal GDP

Measuring a Nations Income: Is GDP a Good Measure of Economic Well-Being