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Exam 3: Interdependence and the Gains From Trade

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Question 31

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By definition, exports are

A) limits placed on the quantity of goods brought into a country.
B) goods in which a country has an absolute advantage.
C) people who work in foreign countries.
D) goods produced domestically and sold abroad.

E) A) and B)
F) B) and C)

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Question 32

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The principle of comparative advantage states that, regardless of the price at which trade takes place, everyone will benefit from trade if they specialize in the production of the good for which they have a comparative advantage.

A) True
B) False

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Question 33

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Table 3-16 The following table contains some production possibilities for an economy for a given month. -Refer to Table 3-16. If the production possibilities frontier is bowed outward, then "?" could be

Figure 3-4 Lisa's Production Possibilities Frontier Bryce's Production Possibilities Frontier -Refer to Figure 3-4. If Bryce must work 4 months to produce each sweater, then his production possibilities frontier is based on how many months of work?

A: Comparative Advantage: The Driving Force of Specialization -Assume for the United States that the opportunity cost of each airplane is 50 cars. Which of these pairs of points could be on the United States' production possibilities frontier?

Table 3-5 Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate. -Refer to Table 3-5. Which of the following represents Iceland's production possibilities frontier when 100 labor hours are available?

Table 3-36 -Refer to Table 3-36. Antigua has an absolute advantage in the production of

Trade can benefit everyone in society because it allows people to specialize in activities in which they have a comparative advantage.

Figure 3-24 The production possibilities frontiers below show how much Bob and Betty can each produce in 8 hours of time. Bob's Production Possibilities Frontier Betty's Production Possibilities Frontier -Refer to Figure 3-24. Betty has

Olivia bakes cakes and Andrew grows corn. Olivia and Andrew both like to eat cake and eat corn. In which of the following cases is it impossible for both Olivia and Andrew to benefit from trade?

In one month, Moira can knit 2 sweaters or 4 scarves. In one month, Tori can knit 1 sweater or 3 scarves. Moira's opportunity cost of knitting scarves is lower than Tori's opportunity cost of knitting scarves.

Table 3-6 Assume that Zimbabwe and Portugal can switch between producing toothbrushes and producing hairbrushes at a constant rate. -Refer to Table 3-6. Assume that Zimbabwe and Portugal each has 180 machine minutes available. If each country divides its time equally between the production of toothbrushes and hairbrushes, then total production is

Table 3-33 Chris and Tony's Production Opportunities -Refer to Table 3-33 Chris and Tony both produce tomatoes and pasta sauce. The table shows their possible production per month if both work the same number of 8 hour days. Given this information, Chris's opportunity cost of 1 lb. of tomatoes is

Table 3-10 Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate. -Refer to Table 3-10. Assume that Japan and Korea each has 2400 hours available. If each country divides its time equally between the production of cars and airplanes, then total production is

With eight hours of work Elmer can produce 20 pounds of carrots or 15 pounds of peas. With eight hours Bugs can produce 10 pounds of carrots or 7.5 pounds of peas. Can Elmer and Bugs gain from trade? Defend your answer.

Figure 3-26 Mary's Production Possibilities Frontier Kate's Production Possibilities Frontier -Refer to Figure 3-26. What is Kate's opportunity cost of one cookie?

Table 3-30 Assume that Falda and Varick can switch between producing wheat and producing cloth at a constant rate. -Refer to Table 3-30. Varick has an absolute advantage in the production of

Figure 3-11 The graph below represents the various combinations of ham and cheese in pounds) that the nation of Bonovia could produce in a given month. -Refer to Figure 3-11. If the production possibilities frontier shown is for 240 hours of production, then how long does it take Bonovia to make one pound of cheese?

An assumption of the production possibilities frontier model is that technology is fixed.

Table 3-22 Assume that Zimbabwe and Portugal can switch between producing toothbrushes and producing hairbrushes at a constant rate. -Refer to Table 3-22. Zimbabwe has an absolute advantage in the production of