Macroeconomics chapter 3

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The opportunity cost of 1 bushel of wheat for cliffs is

2/3 bushel of corn

the opportunity cost of 2 bushel of corn for cliff is

3 bushels of wheat

the opportunity cost of 1 pound of meat for the farmer is

4 pounds of potatoes

the opportunity cost of 1 pound of potatoes for the rancher is

5/4 pounds of meat

assume both paul and cliff divide their time equally between the production of corn and wheat and they do not trade. if they are the only producers of and corn, then total production of wheat and corn is

7 bushels of wheat and 7 bushels of corn

Regan grows flowers and makes ceramic vases. Jayson also grows flowers and makes vases, but regan is better at producing both. In this case, trade could

Benefit both Jayson and Regan

A country's consumption possibilities can be outside its production possibilities frontier if

The country engages in trade

trade between countries

allows each country to consume at a point outside its production possibilities frontier

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

have a comparative advantage in both activities

the principle of comparative advantage does not provide answers to certain questions. One of those questions is as follows.

how are the gains from trade benefit more than one party to a trade.

assume cliff and paul were both producing wheat and corn and each person was dividing his time equally between two. Then each decides to specialize in the product in which he has a comparative advantage. As a result of this change, total production.

increase by 1 bushel

The rancher has an absolute advantage in

meat, and the farmer has a comparative advantage in potatoes

the rancher has a comparative advantage in

meat, and the farmer has a comparative advantage in potatoes

the farmer and the rancher both could benefit if the farmer were to specialize in

potatoes and the rancher were to specialize in meat.


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