Exam 3: Interdependence and the Gains From Trade

Table 3-18 Chris and Tony's Production Opportunities -Adam Smith asserted that a person should never attempt to make at home

If Shawn can produce more donuts in one day than Sue can produce in one day, then

Table 3-8 Assume that Huang and Min can switch between producing parasols and producing porcelain plates at a constant rate. -Refer to Table 3-8. The opportunity cost of 1 parasol for Min is

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. For many years the two countries traded, each completely specializing according to their respective comparative advantages. Now, however, war has broken out between them and all trade has stopped. 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. The war has caused the combined yearly output of the two countries to decline by

Pocoyo bakes cookies and Pato grows vegetables. In which of the following cases is it impossible for both Pocoyo and Pato to benefit from trade?

Table 3-11 Assume that Falda and Varick can switch between producing wheat and producing cloth at a constant rate. -Refer to Table 3-11. Assume that Falda and Varick each has 1 hour available. If each person divides his time equally between the production of wheat and cloth, then total production is

Table 3-17 US and French Production Opportunities -Refer to Table 3-17 France has an absolute advantage in the production of

Table 3-12 -Refer to Table 3-1. Relative to the rancher, the farmer has

The principle of comparative advantage states that, regardless of the price at which trade takes place, everyone will benefit from trade if they specialize in the production of the good for which they have a comparative advantage.

For both parties to gain from trade, the price at which they trade must lie exactly in the middle of the two opportunity costs.

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. Without trade, Japan produced and consumed 50 cars and 6 airplanes and Korea produced and consumed 27 cars and 7 airplanes. Then, each country agreed to specialize in the production of the good in which it has a comparative advantage and trade 28 cars for 8 airplanes. As a result, Japan gained

Figure 3-4 -Refer to Figure 3-4. The opportunity cost of 1 poem for Jordan is

Canada and the U.S. both produce wheat and computer software. Canada is said to have the comparative advantage in producing wheat if

Suppose that a worker in Agland can produce either 10 units of organic grain or 2 units of incense per year, and a worker in Zenland can produce either 5 units of organic grain or 15 units of incense per year. There are 20 workers in Agland and 10 workers in Zenland. Currently the two countries do not trade. Agland produces and consumes 100 units of grain and 20 units of incense per year. Zenland produces and consumes 50 units of grain and no incense per year. If each country made the decision to specialize in producing the good in which it has a comparative advantage, then the combined yearly output of the two countries would increase by

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. Which of the following combinations of cheese and bread could England not produce in 40 hours?

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's opportunity cost of one airplane is

Travis can mow a lawn in two hours or he can trim a tree in one hour. Ricardo can mow a lawn in three hours or he can trim a tree in two hours.

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. Assume that Japan and Korea each has 2400 hours available. If each country divides its time equally between the production of cars and airplanes, then total production is

Figure 3-2 Peru's Production Possibilities Frontier -Refer to Figure 3-2. Suppose Peru decides to increase its production of rubies by 30. What is the opportunity cost of this decision?

Figure 3-7 -Refer to Figure 3-7. The opportunity cost of 1 bowl for Bintu is