Exam 3: Interdependence and the Gains From Trade

Suppose that a worker in Radioland can produce either 4 radios or 1 television per year, and a worker in Teeveeland can produce either 2 radios or 4 televisions per year. Each nation has 100 workers. Also suppose that each country completely specializes in producing the good in which it has a comparative advantage. If Radioland trades 100 radios to Teeveeland in exchange for 100 televisions each year, then each country's maximum consumption of new radios and televisions per year will be

Table 3-37 Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate. -Refer to Table 3-37. Iceland should export

Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 20 bushels of corn or 5 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. Which of the following statements is true?

Figure 3-4 Lisa's Production Possibilities Frontier Bryce's Production Possibilities Frontier -Refer to Figure 3-4. If Lisa and Bryce both spend all of their time producing jackets, then total production is

Table 3-30 Assume that Falda and Varick can switch between producing wheat and producing cloth at a constant rate. -Refer to Table 3-30. Varick has an absolute advantage in the production of

Scenario 3-1 The production possibilities frontiers below show how much Greg and Catherine can each produce in 8 hours of time. Greg's Production Possibilities Catherine's Production Possibilities -Refer to Scenario 3-1. Which if any goods) does Catherine have an absolute advantage producing?

Table 3-28 Barb and Jim run a business that sets up and tests computers. Assume that Barb and Jim can switch between setting up and testing computers at a constant rate. The following table applies. -Refer to Table 3-28. Jim has an absolute advantage in

Table 3-32 US and French Production Opportunities -Refer to Table 3-32 The opportunity costs for the US and France are as follows:

Table 3-36 -Refer to Table 3-36. Antigua has a comparative advantage in the production of

Consider two individuals - Howard and Mai - each of whom would like to wear sweaters and eat tasty food. The gains from trade between Howard and Mai are least obvious in which of the following cases?

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

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

Scenario 3-1 The production possibilities frontiers below show how much Greg and Catherine can each produce in 8 hours of time. Greg's Production Possibilities Catherine's Production Possibilities -Refer to Scenario 3-1. What is Greg's opportunity cost of producing ice cream? Explain how you derived your answer.

Suppose Hank and Tony can both produce corn. If Hank's opportunity cost of producing a bushel of corn is 2 bushels of soybeans and Tony's opportunity cost of producing a bushel of corn is 3 bushels of soybeans, then Hank has the comparative advantage in the production of corn.

Timmy can edit 2 pages in one minute and he can type 80 words in one minute. Olivia can edit 1 page in one minute and she can type 100 words in one minute. Timmy has an absolute advantage and a comparative advantage in editing, while Olivia has an absolute advantage and a comparative advantage in typing.

The production possibilities frontier illustrates

Table 3-33 Chris and Tony's Production Opportunities -Refer to Table 3-33 Chris and Tony both produce tomatoes and pasta sauce. The table shows their possible production per month if both work the same number of 8 hour days. Which of the following prices would result in a mutually advantageous trade between Chris and Tony?

Tom produces baseball gloves and baseball bats. Steve also produces baseball gloves and baseball bats, but Tom is better at producing both goods. In this case, trade could

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. Assume that Maya and Miguel each has 60 hours available. If each person divides his/her time equally between the production of mixers and toasters, then total production is

Table 3-34 Assume that Indonesia and India can switch between producing rice and bananas at a constant rate. -Refer to Table 3-34. Indonesia's opportunity cost of producing bananas is