ECON 131 HW 3

Refer to Figure 3-20. Canada's opportunity cost of one unit of Good Y is

1/2 unit of Good X and Mexico's opportunity cost of one unit of Good Y is 2 units of Good X.

Refer to Table 3-24. The opportunity cost of 1 unit of cheese for Spain is

1/2 unit of bread.

Refer to Table 3-24. The opportunity cost of 1 unit of cheese for England is

1/4 unit of bread.

Refer to Figure 3-20. Canada would incur an opportunity cost of 6 units of Good X if it increased its production of Good Y by

12 units

Refer to Table 3-35 (find the table in homework pdf posted in Laulima > Resources). Denmark's opportunity cost of producing 1dozen eggs is

5/4 pounds of ham. This is lower than Finland's opportunity cost of producing 1 dozen eggs.

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 X will increase by

6 units

Refer to Figure 3-20. At which of the following prices would both Canada and Mexico gain from trade with each other?

9 units of Good Y for 6 units of Good X

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

neither ham nor eggs.

The production possibilities frontier illustrates

the combinations of output that an economy can produce

If labor in Mexico is less productive than labor in the United States in all areas of production, if they trade

then both Mexico and the United States still can benefit from trade.

An economy's production possibilities frontier is also its consumption possibilities frontier

when the economy is self-sufficient

Refer to Table 3-24. Without trade, England produced and consumed 32 units of cheese and 2 units of bread and Spain produced and consumed 6 units of cheese and 2 units of bread. Then, each country agreed to specialize in the production of the good in which it has a comparative advantage and trade 7 units of cheese for 2.5 units of bread. As a result, England gained

1 unit of cheese and 0.5 unit of bread and Spain gained 1 unit of cheese and 0.5 unit of bread.

Refer to Table 3-35. At which of the following prices, if any, could both Denmark and Finland gain from trade?

1.4 pounds of ham per dozen eggs.

Refer to Table 3-24. 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

15

Refer to Table 3-24. At which of the following prices would both England and Spain gain from trade with each other?

16 units of bread for 48 units of cheese

Refer to Figure 3-20 (find the figure in homework pdf posted in Laulima > Resources). Canada's opportunity cost of one unit of Good X is

2 units of Good Y and Mexico's opportunity cost of one unit of Good X is 1/2 unit of Good Y.

Refer to Table 3-24. The opportunity cost of 1 unit of bread for Spain is

2 units of cheese.

Refer to Table 3-35. Finland's opportunity cost of producing 1 unit of ham is

2/3 dozen eggs. This is lower than Denmark's opportunity cost.

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

3 units

Suppose that a worker in Freedonia can produce either 6 units of corn or 2 units of wheat per year, and a worker in Sylvania can produce either 2 units of corn or 6 units of wheat per year. Each nation has 10 workers. Without trade, Freedonia produces and consumes 30 units of corn and 10 units of wheat per year. Sylvania produces and consumes 10 units of corn and 30 units of wheat. Suppose that trade is then initiated between the two countries (with full specialization), and Freedonia sends 30 units of corn to Sylvania in exchange for 30 units of wheat. Freedonia will now be able to consume a maximum of

30 units of corn and 30 units of wheat.

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

34 units of cheese and 2 units of bread and Spain will consume 6 units of cheese and 3 units of bread.

Refer to Figure 3-20. Mexico would incur an opportunity cost of 8 units of Good X if it increased its production of Good Y by

4 units

Refer to Table 3-24. The opportunity cost of 1 unit of bread for England is

4 units of cheese.

Both Dave and Caroline produce sweaters and socks. If Dave's opportunity cost of 1 sweater is 3 socks and Caroline's opportunity cost of 1 sweater is 5 socks, then

Dave has a comparative advantage in the production of sweaters.

Refer to Figure 3-20. Canada has a comparative advantage in the production of

Good Y and Mexico has a comparative advantage in the production of Good X.

Refer to Figure 3-20. Canada has an absolute advantage in the production of

Good Y and Mexico has an absolute advantage in the production of Good X.

The principle of comparative advantage does not provide answers to certain questions. One of those questions is

How are the gains from trade shared among the parties to a trade?

Suppose Jim and Tom can both produce baseball bats. If Jim's opportunity cost of producing baseball bats is lower than Tom's opportunity cost of producing baseball bats, then

Jim has a comparative advantage in the production of baseball bats

Suppose Susan can wash three windows per hour or she can iron six shirts per hour. Paul can wash two windows per hour or he can iron five shirts per hour. (Find absolute and comparative advantages)

Susan has an absolute advantage over Paul in washing windows. Susan has a comparative advantage over Paul in washing windows. Paul has a comparative advantage over Susan in ironing shirts.

Ken and Traci are two woodworkers who both make tables and chairs. In one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs. Given this, we know that

Traci has an absolute advantage in chairs.

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

both eggs and ham.

Refer to Table 3-24. England has an absolute advantage in the production of

both goods and Spain has an absolute advantage in the production of neither good.

Refer to Table 3-24. England has a comparative advantage in the production of

cheese and Spain has a comparative advantage in the production of bread.

Refer to Table 3-24. England should specialize in the production of

cheese and Spain should specialize in the production of bread.

Total output in an economy increases when each person specializes because

each person spends more time producing that product in which he or she has a comparative advantage.

For two individuals who engage in the same two productive activities, it is impossible for one of the two individuals to

have a comparative advantage in both activities.

A production possibilities frontier is bowed outward when

the rate of tradeoff between the two goods being produced depends on how much of each good is being produced.

A production possibilities frontier is a straight line when

the rate of tradeoff between the two goods being produced is constant.