Exam 3: Interdependence and the Gains From Trade

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

Figure 3-13 Peru's Production Possibilities Frontier -Refer to Figure 3-13. Suppose Madagascar is willing to trade 40 rubies to Peru for each emerald that Peru produces and sends to Madagascar. Which of the following combinations of emeralds and rubies could Peru then consume, assuming Peru specializes in emerald production?

Harry is a computer company executive, earning $200 per hour managing the company and promoting its products. His daughter Quinn is a high school student, earning $6 per hour helping her grandmother on the farm. Harry's computer is broken. He can repair it himself in one hour. Quinn can repair it in 10 hours. Harry's opportunity cost of repairing the computer is lower than Quinn's.

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. What is Brad's opportunity cost of producing one bushel of wheat?

Table 3-41 ​ ​ -Refer to Table 3-41. Which country has a comparative advantage in producing radios?

If a person chooses self-sufficiency, then she can only consume what she produces.

Table 3-31 ​ -Refer to Table 3-31. For the rancher, the opportunity cost of 16 pounds of meat is

Table 3-4 Assume that Andrea and Paul can switch between producing wheat and producing beef at a constant rate. -Refer to Table 3-4. Which of the following combinations of wheat and beef could Andrea produce in one 8-hour day?

Table 3-31 ​ -Refer to Table 3-31. For the farmer, the opportunity cost of 1 pound of potatoes is

Table 3-29 Juanita and Shantala run a business that programs and tests cellular phones. Assume that Juanita and Shantala can switch between programming and testing cellular phones at a constant rate. The following table applies. ​ -Refer to Table 3-29. Shantala has an absolute advantage in

When two countries trade with one another, it is most likely because

Figure 3-25 Chile's Production Possibilities Frontier Colombia's Production Possibilities Frontier -Refer to Figure 3-25. Colombia should specialize in the production of

​Table 3-38 -​Refer to Table 3-38. Iowa and Nebraska can both produce corn and soybeans, and can switch between the production of corn and soybeans at a constant rate. The table illustrates the amount of corn or soybeans each state can produce in one growing season. At which of the following prices would both Iowa and Nebraska be able to gain from trade with each other?

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?

Scenario 3-2 In country A a worker who works 40 hours can produce 200 pounds of rice or 100 pounds of broccoli. In country B a worker who works 40 hours can produce 160 pounds of rice or 120 pounds of broccoli. -Refer to Scenario 3-2. Give a range of prices in terms of pounds of rice per pound of broccoli at which the two countries would be both be willing to trade.

Henry can make a bird house in 3 hours and he can make a bird feeder in 1 hour. The opportunity cost to Henry of making a bird house is 1/3 bird feeder.

By definition, exports are

Figure 3-17 Maxine's Production Possibilities Frontier Daisy's Production Possibilities Frontier -Refer to Figure 3-17. Suppose Daisy is willing to trade 3/4 tart to Maxine for each pie that Maxine makes and sends to Daisy. Which of the following combinations of pies and tarts could Maxine not then consume, assuming Maxine specializes in making pies and Daisy specializes in making tarts?

Table 3-4 Assume that Andrea and Paul can switch between producing wheat and producing beef at a constant rate. -Refer to Table 3-4. Which of the following combinations of wheat and beef could Paul not produce in one 8-hour day?

Figure 3-21 Uzbekistan's Production Possibilities Frontier Azerbaijan's Production Possibilities Frontier -Refer to Figure 3-21. Azerbaijan's opportunity cost of one nail is