Exam 3: Interdependence and the Gains From Trade

Trade allows a person to obtain goods at prices that are less than that person's opportunity cost because each person specializes in the activity for which he or she has the lower opportunity cost.

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. Japan and Korea would not be able to gain from trade if Korea's opportunity cost of one car changed to

Adam Smith wrote that a person should never attempt to make at home what it will cost him more to make than to buy.

Figure 3-7 -Refer to Figure 3-7. Bintu has an absolute advantage in the production of

Table 3-12 -Refer to Table 3-12. For the farmer, the opportunity cost of 1 pound of meat is

Which of the following statements about comparative advantage is not true?

Table 3-18 Chris and Tony's Production Opportunities -Which of the following would not result from all countries specializing according to the principle of comparative advantage?

For both parties to gain from trade, the price at which they trade must lie between the two opportunity costs.

Table 3-6 Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate. -Refer to Table 3-6. Miguel has an absolute advantage in the production of

Figure 3-4 -Refer to Figure 3-4. If the production possibilities frontier shown for Perry is for 6 months of writing, then how long does it take Perry to write one poem?

Table 3-1 Assume that Andia and Zardia can switch between producing wheat and producing beef at a constant rate. -Refer to Table 3-1. At which of the following prices would both Andia and Zardia gain from trade with each other?

Table 3-18 Chris and Tony's Production Opportunities -Suppose that a worker in Boatland can produce either 5 units of wheat or 25 units of fish per year, and a worker in Farmland can produce either 25 units of wheat or 5 units of fish per year. There are 10 workers in each country. Political pressure from the fish lobby in Farmland and from the wheat lobby in Boatland has prevented trade between the two countries on the grounds that cheap imports would kill the fish industry in Farmland and the wheat industry in Boatland. As a result, Boatland produces and consumes 25 units of wheat and 125 units of fish per year while Farmland produces and consumes 125 units of wheat and 25 units of fish per year. If the political pressure were overcome and trade were to occur, each country would completely specialize in the product in which it has a comparative advantage. If trade were to occur, the combined output of the two countries would increase 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. The opportunity cost of 1 pound of potatoes for the farmer is

Figure 3-11 The graph below represents the various combinations of ham and cheese (in pounds) that the nation of Bonovia could produce in a given month. -Refer to Figure 3-11. If the production possibilities frontier shown is for 240 hours of production, then how long does it take Bonovia to make one pound of cheese?

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. Zimbabwe and Portugal would not be able to gain from trade if Zimbabwe's opportunity cost of one toothbrush changed to

Figure 3-10 Alice and Betty's Production Possibilities in one 8-hour day. -Refer to Figure 3-10. Which of the following statements is correct regarding absolute advantage?

Differences in opportunity cost allow for gains from trade.

Both Bill and Mary produce t-shirts and hats. If Bill's opportunity cost of 1 t-shirt is 4 hats and Mary's opportunity cost of 1 t-shirt is 3 hats, then

Figure 3-2 Peru's Production Possibilities Frontier -Refer to Figure 3-2. The fact that the line slopes downward reflects the fact that

Figure 3-8 -Refer to Figure 3-8. If the production possibilities frontiers shown are each for one day of production, then which of the following combinations of coffee and soybeans could Chile and Colombia together make in a given day?