Exam 3: Interdependence and the Gains From Trade

A person is able to obtain goods at prices that are less than that person's opportunity cost because each person concentrates on the activity for which he or she has the lower opportunity cost.

Julia can produce 15 apple pies or one dozen croissants in one day. Jacque can produce two apple pies or 10 dozen croissants in one day. a. Draw the production possibilities frontiers for Julia and Jacque. b. What pattern of specialisation and trade will benefit both Julia and Jacque?

People's motivation to trade comes from the goods or services they expect to get in return.

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

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

Trade can benefit society as a whole because it allows:

The table below describes the production possibilities for Lee and Amy in a four-hour shift. NARRBEGIN: Table 3-5 Table 3-5 NARREND a. What is the opportunity cost of one coffee for each person? What is the opportunity cost of one croissant? b. Who has a comparative advantage in coffees? Who has a comparative advantage in croissants? c. Who has an absolute advantage in coffees? Who has an absolute advantage in croissants? d. Who should produce coffees? Who should produce croissants?

Use the accompanying table to answer the following questions. Table 3-4 -According to Table 3-4, if England and Spain trade according to the principle of comparative advantage, they will import _____ respectively.

For a country producing two goods, the opportunity cost of one good will be the inverse of the opportunity cost of the other good.

Table 3-2 -Refer to Table 3-2. The opportunity cost of one kg of butter for Lee is:

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

Use the accompanying table to answer the following questions. Table 3-4 -Refer to Table 3-4. If England and Spain specialise and trade according to their respective comparative advantages:

Trade is not based on absolute advantage; rather it is based on comparative advantage.

Trade allows a country to consume outside its production possibilities frontier.

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 Friday, the opportunity cost of 1 kg of coconuts is:

If it takes Australian workers fewer hours to produce every good than it takes Malaysian workers, Australia cannot gain from trade with Malaysia.

International trade may make some individuals in a nation better off, while other individuals are made worse off.

David Ricardo was the author of:

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

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: