Exam 3: Interdependence and the Gains From Trade

Figure 3-15 Perry's Production Possibilities Frontier Jordan's Production Possibilities Frontier -Refer to Figure 3-15. Perry should specialize in the production of

Figure 3-26 Mary's Production Possibilities Frontier Kate's Production Possibilities Frontier -Refer to Figure 3-26. What is Kate's opportunity cost of one muffin?

Table 3-26 Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate. ​ -Refer to Table 3-26. Japan's opportunity cost of one airplane is

When there are two people and each is capable of producing two goods, it is possible for one person to have a comparative advantage over the other in both goods.

Adam Smith wrote that a person should never attempt to make at home what it will cost him more to make than to buy.

Figure 3-14 Arturo's Production Possibilities Frontier Dina's Production Possibilities Frontier -Refer to Figure 3-14. Arturo should specialize in the production of

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. We could use the information in the table to draw a production possibilities frontier for Maya and a second production possibilities frontier for Miguel. If we were to do this, measuring toasters along the horizontal axis, then

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

As long as two people have different opportunity costs, each can gain from trade with the other, since trade allows each person to obtain a good at a price lower than his or her opportunity cost.

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. If Chris and Tony both decide to specialize and produce only the good in which they have a comparative advantage, then

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 mixer for Maya is

A person can benefit from specialization and trade by obtaining a good at a price that is

Olivia bakes cakes and Andrew grows corn. Olivia and Andrew both like to eat cake and eat corn. In which of the following cases is it impossible for both Olivia and Andrew to benefit from trade?

The only two countries in the world, Alpha and Omega, face the following production possibilities frontiers. Alpha's Production Possibilities Frontier Omega's Production Possibilities Frontier a.Assume that each country decides to use half of its resources in the production of each good. Show these points on the graphs for each country as point A. b.If these countries choose not to trade, what would be the total world production of popcorn and peanuts? c.Now suppose that each country decides to specialize in the good in which each has a comparative advantage. By specializing, what is the total world production of each product now? d.If each country decides to trade 100 units of popcorn for 100 units of peanuts, show on the graphs the gain each country would receive from trade. Label these points B.

In most countries today, many goods and services consumed are imported from abroad, and many goods and services produced are exported to foreign customers.

Table 3-41 ​ ​ -Refer to Table 3-41. Which country has an absolute advantage in producing compasses?

Figure 3-16 Hosne's Production Possibilities Frontier Merve's Production Possibilities Frontier -Refer to Figure 3-16. At which of the following prices would both Hosne and Merve gain from trade with each other?

Table 3-22 Assume that Zimbabwe and Portugal can switch between producing toothbrushes and producing hairbrushes at a constant rate. -Refer to Table 3-22. Zimbabwe has an absolute advantage in the production of

Figure 3-17 Maxine's Production Possibilities Frontier Daisy's Production Possibilities Frontier -Refer to Figure 3-17. If Maxine and Daisy switch from each person dividing her time equally between the production of pies and tarts to each person spending all of her time producing the good in which she has a comparative advantage, then total production of tarts will increase by

Figure 3-21 Uzbekistan's Production Possibilities Frontier Azerbaijan's Production Possibilities Frontier -Refer to Figure 3-21. Without trade, Uzbekistan produced and consumed 12 bolts and 36 nails and Azerbaijan produced and consumed 14 bolts and 24 nails. Then, each country agreed to specialize in the production of the good in which it has a comparative advantage and trade 16 bolts for 38 nails. As a result, Uzbekistan gained