Exam 3: Interdependence and the Gains From Trade

Goods produced abroad and sold domestically are called exports and goods produced domestically and sold abroad are called imports.

Figure 3-7 -Refer to Figure 3-7. Bintu has a comparative advantage in the production of

Which of the following is not a reason people choose to depend on others for goods and services?

If a country has the comparative advantage in producing a product, then that country must also have the absolute advantage in producing that product.

Suppose that in one hour Dewey can produce either 10 bushels of corn or 20 yards of cloth. Dewey's opportunity cost of producing one bushel of corn is 1/2 yard of cloth.

Table 3-18 Chris and Tony's Production Opportunities -When two countries trade with one another, it is most likely because

Figure 3-6 -Refer to Figure 3-6. Daisy has an absolute advantage in the production of

A production possibilities frontier is bowed outward when

Assume a farmer has the ability to produce corn and/or beans. Whenever the farmer spends 1 hour less producing corn and 1 hour more producing beans, he reduces his output of corn by 2 bushels and raises his output of beans by 3 bushels. In view of these assumptions, the farmer's production possibilities frontier is bowed out.

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. At which of the following prices would both Maya and Miguel gain from trade with each other?

When describing the opportunity cost of two producers, economists use the term

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. We could use the information in the table to draw a production possibilities frontier for Maya and a second production possibilities frontier for Miguel. If we were to do this, measuring toasters along the horizontal axis, then

Table 3-2 Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate. -Refer to Table 3-2. At which of the following prices would both Aruba and Iceland gain from trade with each other?

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 which of the following combinations of ham and cheese could Bonovia produce in 240 hours?

Figure 3-8 -Refer to Figure 3-8. Chile's opportunity cost of one pound of soybeans is

Table 3-5 Assume that England and Spain can switch between producing cheese and producing bread at a constant rate. -Refer to Table 3-5. England has an absolute advantage in the production of

Table 3-5 Assume that England and Spain can switch between producing cheese and producing bread at a constant rate. -Refer to Table 3-5. We could use the information in the table to draw a production possibilities frontier for England and a second production possibilities frontier for Spain. If we were to do this, measuring cheese along the horizontal axis, then

If he devotes all of his available resources to cantaloupe production, a farmer can produce 120 cantaloupes. If he sacrifices 1.5 watermelons for each cantaloupe that he produces, it follows that

Figure 3-9 -Refer to Figure 3-9. Without trade, Uzbekistan produced and consumed 12 bolts and 36 nails and Azerbaijan produced and consumed 14 bolts and 24 nails. Then, each country agreed to specialize in the production of the good in which it has a comparative advantage and trade 16 bolts for 38 nails. As a result, Uzbekistan gained

Explain the difference between absolute advantage and comparative advantage. Which is more important in determining trade patterns, absolute advantage or comparative advantage? Why?