Exam 3: Interdependence and the Gains From Trade

Scenario 3-1 The production possibilities frontiers below show how much Greg and Catherine can each produce in 8 hours of time. Greg's Production Possibilities Catherine's Production Possibilities -Refer to Scenario 3-1. Is it possible for Greg and Catherine to gain from trade? Defend your answer.

Figure 3-16 Hosne's Production Possibilities Frontier Merve's Production Possibilities Frontier -Refer to Figure 3-16. Hosne should specialize in the production of

Figure 3-22 Alice and Betty's Production Possibilities in one 8­hour day. Alice's Production Possibilities Frontier Betty's Production Possibilities Frontier -Refer to Figure 3-22. What are Alice and Betty's opportunity costs of 1 pizza?

Table 3-21 Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. The following table shows the number of coolers or number of radios each country can produce in one day. -Refer to Table 3-21. Jamaica's opportunity cost of one cooler is

Table 3-35 -Refer to Table 3-35. Denmark's opportunity cost of producing 1dozen eggs is

Adam Smith developed the theory of comparative advantage as we know it today.

Table 3-15 -Refer to Table 3-15. Which of the following combinations of meat and potatoes could the rancher not produce in 40 hours?

Table 3-35 -Refer to Table 3-35. Which good(s) does Denmark have an absolute advantage producing?

Figure 3-20 Canada's Production Possibilities Frontier Mexico's Production Possibilities Frontier -Refer to Figure 3-20. If Canada and Mexico switch from each country dividing its time equally between the production of Good X and Good Y to each country spending all of its time producing the good in which it has a comparative advantage, then total production of Good Y will increase by

Figure 3-26 Mary's Production Possibilities Frontier Kate's Production Possibilities Frontier -Refer to Figure 3-26. Who has a comparative advantage in making cookies?

Table 3-4 Assume that Andrea and Paul can switch between producing wheat and producing beef at a constant rate. -Refer to Table 3-4. Which of the following combinations of wheat and beef could Paul not produce in one 8-hour day?

Explain the difference between absolute advantage and comparative advantage. Which is more important in determining trade patterns, absolute advantage or comparative advantage? Why?

Consider two individuals - Howard and Mai - each of whom would like to wear sweaters and eat tasty food. The gains from trade between Howard and Mai are least obvious in which of the following cases?

Table 3-24 Assume that England and Spain can switch between producing cheese and producing bread at a constant rate. -Refer to Table 3-24. If England and Spain each spends all its time producing the good in which it has a comparative advantage and the countries agree to trade 2 units of bread for 6 units of cheese, then England will consume

Table 3-23 Assume that the farmer and the rancher can switch between producing pork and producing tomatoes at a constant rate. -Refer to Table 3-23. The opportunity cost of 1 pound of pork for the rancher is

What does a production possibilities frontier represent?

Figure 3-14 Arturo's Production Possibilities Frontier Dina's Production Possibilities Frontier -Refer to Figure 3-14. Dina has an absolute advantage in the production of

Table 3-36 -Refer to Table 3-36. What is Antigua's opportunity cost of one towel?

Table 3-23 Assume that the farmer and the rancher can switch between producing pork and producing tomatoes at a constant rate. -Refer to Table 3-23. Without trade, the farmer produced and consumed 2 pounds of pork and 4 pounds of tomatoes and the rancher produced and consumed 4 pounds of pork and 2 pounds of tomatoes. Then, each person agreed to specialize in the production of the good in which he has a comparative advantage and trade 4 pounds of pork for 6 pounds of tomatoes. As a result,

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?