Chapter 3: Interdependence and the Gains from Trade

Suppose that in the United States, producing an aircraft takes 10,000 hours of labor and producing a shirt takes 2 hours of labor. In China, producing an aircraft takes 40,000 hours of labor, while producing a shirt takes 4 hours of labor. What will these nations trade?

China will export shirts, while the United States will export aircraft.

Kayla can cook dinner in 30 minutes and wash the laundry in 20 minutes. Her roommate takes half as long to do each task. How should the roommates allocate the work?

There are no gains from trade in this situation.

When two individuals produce efficiently and then make a mutually beneficial trade based on comparative advantage,

They both obtain consumption outside their production possibilities frontier.

Which goods will a nation typically import?

Those goods in which other nations have a comparative advantage.

Once again, in an hour, Mateo can wash 2 cars or mow 1 lawn, and Tyler can wash 3 cars or mow 1 lawn. Who has the comparative advantage in car washing, and who has the comparative advantage in lawn mowing?

Tyler in washing, Mateo in mowing.

In an hour, Mateo can wash 2 cars or mow 1 lawn, and Tyler can wash 3 cars or mow 1 lawn. Who has the absolute advantage in car washing, and who has the absolute advantage in lawn mowing?

Tyler in washing, neither in mowing.