Exam 3: Interdependence and the Gains From Trade

Graph 3-1 These figures illustrate the production possibilities frontiers for Robinson Crusoe and Friday with 12 hours of labour. -According to Graph 3-1:

Table 3-3 -Refer to Table 3-3. If the US and Europe trade according to the principle of comparative advantage, Europe will export what product to the US?

Table 3-3 -Refer to Table 3-3. If the US and Europe trade according to the principle of comparative advantage, the US will export what product to Europe?

Table 3-2 -Refer to Table 3-2. For Lee the opportunity cost of one kg of rice is:

The conclusions of Adam Smith and David Ricardo on the gains from trade are no longer valid due to the increase of barriers to trade.

Adam Smith:

Table 3-3 -Refer to Table 3-3. The opportunity cost of one aeroplane for the US is:

David Riccardo developed the theory of comparative advantage, as we know it today.

Which of the following is NOT correct?

If capital in China is less productive than capital in Australia in agricultural production:

A constant trade-off in the production of two goods implies that the production possibility frontier will be a curve rather than a straight line.

Give an example of a good or service that you regularly buy. Then give an example of a good or service you provide in your own household. Why don't you become more self-sufficient?

Use the accompanying table to answer the following questions. Table 3-4 -Refer to Table 3-4. If England and Spain trade according to the principle of comparative advantage, England will export which product to Spain?

Table 3-3 -According to Table 3-3:

Suppose that Vanuatu can produce 40 logs or 400 kg of sugar cane per month and Fiji can produce 30 logs or 300 kg of sugar cane per month. Will it pay for Vanuatu and Fiji to specialise and trade in these two commodities?

Use the accompanying table to answer the following questions. Table 3-4 -Refer to Table 3-4. The opportunity cost of one unit of cheese in England is:

Lee can pick 30 apples in one hour. He can pick 60 kiwifruit in half an hour. The opportunity cost to Lee of picking one apple is four kiwifruit.

Imports are:

David Ricardo made the statement that 'It is a maxim of every prudent master of a family never to attempt to make at home what it will cost him more to make than to buy'.

As long as two people have different opportunity costs, each can gain from trade by being able to obtain a good at a price lower than his or her opportunity cost.