Exam 3: Interdependence and the Gains From Trade

Gary and Diane must prepare a presentation for their marketing class.As part of their presentation,they must do a series of calculations and prepare 50 PowerPoint slides.It would take Gary 10 hours to do the required calculation and 10 hours to prepare the slides.It would take Diane 12 hours to do the calculations and 20 hours to prepare the slides. a. How much time would it take the two to complete the project if they divide the calculations equally and the slides equally? b. How much time would it take the two to complete the project if they use comparative advantage and specialize in calculating or preparing slides? c. If Diane and Gary have the same opportunity cost of $5 per hour,is there a better solution than for each to specialize in calculating or preparing slides?

The following table contains some production possibilities for an economy for a given month. If the production possibilities frontier is a straight line,then "?" must be

Table 3-8 Assume that Kito and Penda can switch between producing baskets and producing birdhouses at a constant rate. -Refer to Table 3-8.Which of the following points would be on Penda's production possibilities frontier,based on a 24-hour production period?

Figure 3-7 Bintu's Production Possibilities Frontier Juba's Production Possibilities Frontier -Refer to Figure 3-7.If Bintu must work 2 hours to make each cup,then her production possibilities frontier is based on how many hours of work?

Suppose that a worker in Boatland can produce either 5 units of wheat or 25 units of fish per year,and a worker in Farmland can produce either 25 units of wheat or 5 units of fish per year.There are 10 workers in each country.Political pressure from the fish lobby in Farmland and from the wheat lobby in Boatland has prevented trade between the two countries on the grounds that cheap imports would kill the fish industry in Farmland and the wheat industry in Boatland.As a result,Boatland produces and consumes 25 units of wheat and 125 units of fish per year while Farmland produces and consumes 125 units of wheat and 25 units of fish per year.If the political pressure were overcome and trade were to occur,each country would completely specialize in the product in which it has a comparative advantage.If trade were to occur,the combined output of the two countries would increase by

Table 3-11 Assume that Falda and Varick can switch between producing wheat and producing cloth at a constant rate. -Refer to Table 3-11.Assume that Falda and Varick each has 1 hour available.If each person divides their time equally between the production of wheat and cloth,then total production is

Table 3-4 Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate. -Refer to Table 3-4.Assume that the farmer and the rancher each has 40 labor hours available.If each person spends all his time producing the good in which he has a comparative advantage,then total production is

Figure 3-6 Maxine's Production Possibilities Frontier Daisy's Production Possibilities Frontier -Refer to Figure 3-6.If the production possibilities frontier shown for Maxine is for 3 hours of work,then how long does it take Maxine to make one pie?

Specialization and trade are closely linked to

Figure 3-9 Uzbekistan's Production Possibilities Frontier Azerbaijan's Production Possibilities Frontier -Refer to Figure 3-9.Suppose Azerbaijan is willing to trade 3 nails to Uzbekistan for every bolt that Uzbekistan makes and sends to Azerbaijan.Which of the following combinations of bolts and nails could Azerbaijan then consume,assuming Uzbekistan specializes in making bolts and Azerbaijan specializes in making nails?

An economy can produce at any point on or inside its production possibilities frontier,but it cannot produce at points outside its production possibilities frontier.

Two countries can achieve gains from trade even if one country has an absolute advantage in the production of both goods.

By definition,exports are

Table 3-4 Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate. -Refer to Table 3-4.The rancher has an absolute advantage in the production of

Table 3-4 Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate. -Refer to Table 3-4.The farmer has an absolute advantage in the production of

Table 3-7 Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate. -Refer to Table 3-7.Without trade,Japan produced and consumed 50 cars and 6 airplanes and Korea produced and consumed 27 cars and 7 airplanes.Then,each country agreed to specialize in the production of the good in which it has a comparative advantage and trade 28 cars for 8 airplanes.As a result,Japan gained

Figure 3-5 Puneet's Production Possibilities Frontier Chirag's Production Possibilities Frontier -Refer to Figure 3-5.If Puneet and Chirag each divides his time equally between making purses and making wallets,then total production is

Refer to Table 3-2.Aruba and Iceland would not be able to gain from trade if Iceland's opportunity cost of one radio changed to

Figure 3-7 Bintu's Production Possibilities Frontier Juba's Production Possibilities Frontier -Refer to Figure 3-7.Bintu has a comparative advantage in the production of

Table 3-5 Assume that England and Spain can switch between producing cheese and producing bread at a constant rate. -Refer to Table 3-5.The opportunity cost of 1 unit of cheese for Spain is