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Exam 3: Interdependence and the Gains From Trade

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Question 121

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Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year,and a worker in Oatland can grow either 5 bushels of corn or 50 bushels of oats per year.There are 20 workers in Cornland and 20 workers in Oatland.If the two countries do not trade,Cornland will produce and consume 400 bushels of corn and 100 bushels of oats,while Oatland will produce and consume 60 bushels of corn and 400 bushels of oats.If each country made the decision to specialize in producing the good in which it has a comparative advantage,then the combined yearly output of the two countries would increase by

A) 280 bushels of corn and 450 bushels of oats.
B) 340 bushels of corn and 500 bushels of oats.
C) 360 bushels of corn and 520 bushels of oats.
D) 360 bushels of corn and 640 bushels of oats.

E) B) and D)
F) C) and D)

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Question 122

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Opportunity cost measures the trade-off between two goods that each producer faces.

A) True
B) False

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Question 123

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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 divides his time equally between the production of meat and potatoes,then total production is

The production possibilities frontier illustrates

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.Assume that England and Spain each has 40 labor hours available.Originally,each country divided its time equally between the production of cheese and bread.Now,each country spends all its time producing the good in which it has a comparative advantage.As a result,the total output of cheese increased by

Figure 3-2 Peru's Production Possibilities Frontier -Refer to Figure 3-2.Suppose Madagascar is willing to trade 40 rubies to Peru for each emerald that Peru produces and sends to Madagascar.Which of the following combinations of emeralds and rubies could Peru then consume,assuming Peru specializes in emerald production?

Suppose that in one hour Dewey can produce either 10 bushels of corn or 20 yards of cloth.Then Dewey's opportunity cost of producing one bushel of corn is 1/2 yard of cloth.

Table 3-2 Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate. -Refer to Table 3-2.Which of the following represents Iceland's production possibilities frontier when 100 labor hours are available?

Adam Smith

Table 3-9 Barb and Jim run a business that sets up and tests computers.Assume that Barb and Jim can switch between setting up and testing computers at a constant rate.The following table applies. -Refer to Table 3-9.Barb's opportunity cost of testing one computer is setting up

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.Varick has an absolute advantage in the production of

Table 3-2 Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate. -Refer to Table 3-2.Aruba has a comparative advantage in the production of

Table 3-1 Assume that Sardi and Tinaka can switch between producing corn and producing pork at a constant rate. -Refer to Table 3-1.What is Sardi's opportunity cost of producing one bushel of corn?

The gains from specialization and trade are based on absolute advantage.

Figure 3-6 Maxine's Production Possibilities Frontier Daisy's Production Possibilities Frontier -Refer to Figure 3-6.If Daisy must work 2.5 hours to make each pie,then her production possibilities frontier is based on how many hours of work?

Figure 3-9 Uzbekistan's Production Possibilities Frontier Azerbaijan's Production Possibilities Frontier -Refer to Figure 3-9.If Uzbekistan and Azerbaijan each divides its time equally between making bolts and making nails,then total production is

Figure 3-4 Perry's Production Possibilities Frontier Jordan's Production Possibilities Frontier -Refer to Figure 3-4.If the production possibilities frontiers shown are each for one year of writing,then which of the following combinations of novels and poems could Perry and Jordan together write in a given year?

Timmy can edit 2 pages in one minute and he can type 80 words in one minute.Olivia can edit 1 page in one minute and she can type 100 words in one minute.Timmy has an absolute advantage and a comparative advantage in editing,while Olivia has an absolute advantage and a comparative advantage in typing.

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.We could use the information in the table to draw a production possibilities frontier for England and a second production possibilities frontier for Spain.If we were to do this,measuring bread along the horizontal axis,then

Goods produced abroad and sold domestically are called exports and goods produced domestically and sold abroad are called imports.