Exam 3: Interdependence and the Gains From Trade

In a world of two goods and two people, explain why there are gains from trade if: a. one person can produce only one good and the other person can produce only the other good. b. each person can produce both goods but can produce one of the goods only at a great cost.

Table 3-3 -According to Table 3-3, the US and Europe could benefit by specialising in _____ respectively.

Use the accompanying table to answer the following questions. Table 3-4 -According to Table 3-4:

Graph 3-2 These figures illustrate the production possibilities available to Amy and Jim with 8 hours of labour. -Refer to Graph 3-2. The opportunity cost of one coffee for Jim is:

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

The principle of comparative advantage was developed by:

Suppose George can make 12 coffees or six croissants in an hour. Lewis can make 15 coffees or 10 croissants in an hour. Under these conditions there will be no benefit to Lewis to trade with George.

If trade is not possible, then each person's production possibility frontier is the same as each person's consumption possibility frontier.

Graph 3-2 These figures illustrate the production possibilities available to Amy and Jim with 8 hours of labour. -According to Graph 3-2:

The producer who requires a smaller quantity of inputs to produce a good is said to have an absolute advantage in producing that good.

Table 3-2 -According to Table 3-2:

Table 3-1 -Refer to Table 3-1. For the cattle farmer, the opportunity cost of one kg of potatoes is:

Suppose that a worker in Argentina can make two saddles or 10 bridles per month, and a worker in Brazil can make three saddles or 20 bridles per month. a. In what sense do saddles and bridles cost less in Brazil than in Argentina? b. In what sense do saddles cost less in Argentina than in Brazil? c. If Argentina and Brazil were to engage in trade, which country would export which good? d. Would the answer to the above question change if a worker in Brazil could make four saddles per month?

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:

Graph 3-1 These figures illustrate the production possibilities frontiers for Robinson Crusoe and Friday with 12 hours of labour. -Refer to Graph 3-1. For Robinson Crusoe, the opportunity cost of one kg of fish is:

Use the accompanying table to answer the following questions. Table 3-4 -According to Table 3-4:

Table 3-1 -Refer to Table 3-1. For the cattle farmer, the opportunity cost of 1 kg of meat is:

Exports are:

It takes Sandy one week to write three poems or to write a song. The opportunity cost to Sandy of one poem is 1/3 of a song.

Economists generally support: