Exam 3: Interdependence and the Gains From Trade

Alexis is a lawyer. She bills her clients $100 an hour for her services. She can also mow her lawn in 30 minutes. She can hire someone to mow her lawn who takes an hour. Of the following prices, which is the highest Alexis would pay someone to mow her lawn?

Table 3-25 Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate. -Refer to Table 3-25. The opportunity cost of 1 toaster for Maya is

Figure 3-15 Perry's Production Possibilities Frontier Jordan's Production Possibilities Frontier -Refer to Figure 3-15. Suppose Perry is willing to trade 4 poems to Jordan for each novel that Jordan writes and sends to Perry. Which of the following combinations of novels and poems could Jordan then consume, assuming Jordan specializes in novel production and Perry specializes in poem production?

Figure 3-17 Maxine's Production Possibilities Frontier Daisy's Production Possibilities Frontier -Refer to Figure 3-17. Suppose Maxine decides to increase her production of tarts by 5. What is the opportunity cost of this decision?

Table 3-3 Production Opportunities -Refer to Table 3-3. Which of the following combinations of cheese and wine could France produce in 40 hours?

Figure 3-2 Brazil's Production Possibilities Frontier -Refer to Figure 3-2. If the production possibilities frontier shown is for 24 hours of production, then how long does it take Brazil to make one cashew?

Adam Smith developed the theory of comparative advantage as we know it today.

Figure 3-10 Alice and Betty's Production Possibilities in one 8­hour day. Alice's Production Possibilities Frontier Betty's Production Possibilities Frontier -Refer to Figure 3-10. If Alice produces only lemonade, she can produce

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

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

Table 3-14 Assume that Nick and Faldo can switch between producing wheat and producing cloth at a constant rate. -Refer to Table 3-14. Assume that Nick and Faldo each has 2 hours available. If each person divides his time equally between the production of wheat and cloth, then total production is

Figure 3-5 Hosne's Production Possibilities Frontier Merve's Production Possibilities Frontier -Refer to Figure 3-5. If the production possibilities frontier shown for Merve is for 8 hours of work, then how long does it take Merve to make one purse?

The gains from trade are

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

Figure 3-18 Bintu's Production Possibilities Frontier Juba's Production Possibilities Frontier -Refer to Figure 3-18. Suppose Juba is willing to trade one bowl to Bintu for every two cups that Bintu makes and sends to Juba. Which of the following combinations of bowls and cups could Bintu then consume, assuming Bintu specializes in making cups and Juba specializes in making bowls?

Figure 3-14 Arturo's Production Possibilities Frontier Dina's Production Possibilities Frontier -Refer to Figure 3-14. Without trade, Arturo produced and consumed 240 tacos and 120 burritos and Dina produced and consumed 100 tacos and 150 burritos. Then, each person agreed to specialize in the production of the good in which they have a comparative advantage and trade 260 tacos for 156 burritos. As a result, Arturo gained

Table 3-20 Assume that Brad and Theresa can switch between producing wheat and producing beef at a constant rate. -Refer to Table 3-20. Brad should specialize in the production of

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 wine along the horizontal axis, then

Opportunity cost refers to how many inputs a producer requires to produce a good.

A country that currently does not trade with other countries could benefit by