Exam 3: Interdependence and the Gains From Trade

Consider two individuals, Jarek and Danuta each of whom knits sweaters and makes hamburgers, respectively. The gains from trade between Jarek and Danuta are most obvious in which of the following cases?

Table 3-13 -Refer to Table 3-13. What is England's opportunity cost of one radio?

Table 3-5 Assume that France and Portugal can switch between producing cheese and producing bread at a constant rate. ​ ​ -Refer to Table 3-5. Which of the following combinations of cheese and bread could Portugal produce in 24 hours?

Table 3-13 -Refer to Table 3-13. Which country has an absolute advantage in producing compasses?

​The production possibilities frontier (PPF) depicts the combinations of goods that provides society with the maximum possible benefit.

A popular celebrity that is paid highly for her time should probably not mow her own lawn because

​A country can have a comparative advantage in the production of a good, even if it does not have an absolute advantage in the production of that good.

A gardener has the ability to grow either apples or pears or some combination of the two. Given no other information, it follows that the gardener's opportunity cost of a pound of apples multiplied by his opportunity cost of a pound of pears

Trade allows all countries to achieve greater prosperity.

Ellie and Brendan both produce apple pies and vanilla ice cream. If Ellie's opportunity cost of one apple pie is 1/2 gallon of ice cream and Brendan's opportunity cost of one apple pie is 1/4 gallon of ice cream, Ellie has a comparative advantage in the production of ice cream.

Table 3-13 -Refer to Table 3-13. Which country has a comparative advantage in producing compasses?

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.

If a country has a lower opportunity cost than its potential trading partner, the country should decide to be self-sufficient.

When each person specializes in producing the good in which he or she has a comparative advantage, each person can gain from trade but total production in the economy is unchanged.

​Whenever a nation is producing on its PPF, that nation will be using all of its available resources.

If Wrex can produce more math problems per hour and more book reports per hour than Maxine can, then Wrex cannot gain from trading math problems and book reports with Maxine.

Opportunity cost measures the trade-off between two goods that each producer faces.

Table 3-7 Barb and Ren run a business that sets up and tests computers. Assume that Barb and Ren can switch between setting up and testing computers at a constant rate. The following table applies. ​ ​ -Refer to Table 3-7. Which of the following points would not be on Barb's production possibilities frontier, based on a 40-hour week?

Trade can only benefit a nation if that nation has an absolute advantage in the production of that good. ​

Ellie and Brendan both produce apple pies and vanilla ice cream. If Ellie's opportunity cost of one apple pie is 1/2 gallon of ice cream and Brendan's opportunity cost of one apple pie is 1/4 gallon of ice cream, a mutually advantageous trade can be struck at a price of one apple pie for 1/3 gallon of ice cream.