Exam 2: The Power of Trade

The benefits of economies of scale and increased competition to an economy include lower unit costs.

The Dark Ages was a period in which trade:

Each of 100 people receives a random item from a grocery store and assigns it a value between 1 (low)and 10 (high).They trade those items among themselves for items they prefer rather than those they randomly received and then assign a second value (again,1 to 10)to the item that they end up with after the trading concludes.How would the sum of those values before trading compare with the sum after trading?

As trade becomes more extensive,it slows down the creation of new ideas because fewer people can specialize in areas like science and engineering.

Use the following to answer questions Figure: PPF Goods X & Y -(Figure: PPF Goods X & Y)Refer to the figure.Point A represents an allocation of resources that is:

In a world with trade,no one can afford to specialize.

In the time it takes Stanley to clean the bathroom he can make three cheesecakes.In the time it takes Fran to clean the bathroom she can make two cheesecakes.Fran has a comparative advantage in cleaning the bathroom.

Some countries have comparative advantages in everything.

Trading increases the amount a single country can produce.

Phil can clean and polish silverware in two hours and change spark plugs in a car in four hours.Betty can clean and polish the same silverware in 1 hour and change spark plugs in a car in 1 hour.Phil does not have a comparative advantage in either activity.