Exam 3: Interdependence and the Gains From Trade

In an economy consisting of two people producing two goods, it is possible for one person to have the absolute advantage and the comparative advantage in both goods.

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

Use the following Table to answer the question : Table 3-31 -Refer to Table 3-31. For the farmer, the opportunity cost of 1 pound of meat is

What does a production possibilities frontier represent?

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

Suppose the United States has a comparative advantage over Mexico in producing pork. The principle of comparative advantage asserts that

Use the following Table to answer the question : Table 3-23 Assume that the farmer and the rancher can switch between producing pork and producing tomatoes at a constant rate. -Refer to Table 3-23. The rancher has an absolute advantage in the production of

Use the following Table to answer the question : Table 3-21 Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. The following table shows the number of coolers or number of radios each country can produce in one day. -Refer to Table 3-21. At which of the following prices would both Jamaica and Norway gain from trade with each other?

Use the following Table to answer the question : Table 3-9 Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate. -Refer to Table 3-9. Which of the following combinations of mixers and toasters could Maya produce in 60 hours?

Use the following Table to answer the question : Table 3-8 Assume that England and Spain can switch between producing cheese and producing bread at a constant rate. -Refer to Table 3-8. Which of the following combinations of cheese and bread could Spain produce in 24 hours?

Use the following Figure to answer the question : Figure 3-21 Uzbekistan's Production Possibilities Frontier Azerbaijan's Production Possibilities Frontier -Refer to Figure 3-21. Suppose Azerbaijan is willing to trade 3 nails to Uzbekistan for every bolt that Uzbekistan makes and sends to Azerbaijan. Which of the following combinations of bolts and nails could Azerbaijan then consume, assuming Uzbekistan specializes in making bolts and Azerbaijan specializes in making nails?

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

For two individuals who engage in the same two productive activities, it is impossible for one of the two individuals to

Use the following Table to answer the question : Table 3-17 The following table contains some production possibilities for an economy for a given year. -Refer to Table 3-17. If the production possibilities frontier is a straight line, then "?" must be

Use the following Table to answer the question : Table 3-24 Assume that England and Spain can switch between producing cheese and producing bread at a constant rate. -Refer to Table 3-24. The opportunity cost of 1 unit of bread for Spain is

The opportunity cost of an item is

Use the following Table to answer the question : Table 3-3 Production Opportunities -Refer to Table 3-3. We could use the information in the table to draw a production possibilities frontier for England and a second production possibilities frontier for France. If we were to do this, measuring cheese along the horizontal axis, then

Use the following Figure to answer the question : Figure 3-14 Arturo's Production Possibilities Frontier Dina's Production Possibilities Frontier -Refer to Figure 3-14. Suppose Arturo is willing to trade 6 burritos to Dina for each 10 tacos that Dina produces and sends to Arturo. Which of the following combinations of tacos and burritos could Dina then consume, assuming Dina specializes in taco production and Arturo specializes in burrito production?

Use the following Table to answer the question : Table 3-19 Summary of the Gains from Trade -Refer to Table 3-19. The values in the table represent the amounts of lemonade and pizzas that Alice and Betty can produce in one week without and with specialization and trade. What are Alice and Betty's gains from specialization and trade?

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