Chapter 2: The Power of Trade and Comparative Advantage

2.67 bushels of corn

A farmer produces both beans and corn on her farm. If she must give up 16 bushels of corn to be able to get 6 bushels of beans, then her opportunity cost of 1 bushel of beans is

equal to one.

A gardener can produce either beans or corn in her garden. The gardener's opportunity cost of a bushel of beans multiplied by her opportunity cost of a bushel of corn is

input requirements per unit of output

Absolute advantage can be determined by comparing different producers'

Tunisia neither Tunisia Ireland

Assume Ireland and Tunisia can both produce grain and dates, and that the only limited resource is the farming labor force, meaning that land, water, and all other resources are plentiful in both countries. Each farmer in Ireland can produce 10 t of grain or 5 t of dates in a season. Each farmer in Tunisia can also produce 10 t of grain or 25 t of dates. Please answer the four questions. 1. Which country has the absolute advantage in producing dates? 2. Which country has the absolute advantage in producing grain? 3. Which country has the comparative advantage in producing dates? 4. Which country has the comparative advantage in producing grain?

96 0 8 12 0

Christine and Paul are deciding how to split their time between writing music and lyrics for their new album. Their PPFs for 72 h of work are shown. Christine and Paul have to write music for 8 songs and lyrics for 12 songs (4 songs already have music). When they are done, they can go to a private island and relax from all their hard work. It is possible that they will use more than 72 h. Chart: -Christine: music written (# of songs): 8 and lyrics written (# of songs): 9 -Paul: music written (# of songs): 6 and lyrics written (# of songs): 4 1. Once they start writing lyrics and music, assuming their hired help packs for them and their plane is waiting outside their door, in how many hours can they board the plane to their relaxing island getaway? 2. Christine will write music for ___ songs. 3. Paul will write music for ___ songs. 4. Christine will write lyrics for ___ songs. 5. Paul will write lyrics for ___ songs.

false false true true false

Classify the statements as true or false. 1. The process of specialization and trade has positive net benefits and is, therefore, beneficial to everyone. 2. A nation will not have a comparative advantage in a product if it does not also have an absolute advantage in the production of that good. 3. It can be mutually beneficial for two nations to specialize in goods for which they have a comparative advantage and then trade with one another. 4. Countries specialize in the production of goods for which they have a comparative advantage. 5. Absolute advantage is the source of the potential gains from specialization and trade.

total production of bread will be 12 loaves, and the total production of cake will be 8 units.

Kate and Sarah own a bakery together. The two figures illustrate the production possibilities available to them if they work at their bakery for 8 h a day. Answer the question using these figures. Chart: -Kate: breads: 4 and cakes: 8 - Sarah: breads: 12 and cakes: 9 If Kate and Sarah both specialize in the good in which they have a comparative advantage, the

4/3

Ned owns a small electronics repair business. He can either repair iPhones or Samsung phones. If he only repairs iPhones he can repair 16 phones in a day. If he only repairs Samsung phones, he can repair12 in a day. Drag the endpoints of the line to plot his production possibilities frontier (PPF) on the graph. Chart: -iPhones repaired per day: 16 -Samsung phone repaired per day: 12 What is the opportunity cost of Samsung repairs production (in terms of iPhone repairs/Samsung repairs)?

6.33 0.54

Suppose that Paulie and Vince each can produce ice cream or t-shirts. The table shows the quantity of each good that Paulie and Vince each can produce in one hour, respectively, if they devote all of their time and effort to making the good. Chart: -Paulie: ice cream: 3.00 and t-shirts: 19.00 -Vince: ice cream: 7.00 and t-shirts: 13.00 1. What is Paulie's opportunity cost of producing one cup of ice cream (round to two decimal places)? 2. What is Vince's opportunity cost of producing one t-shirt (round to two decimal places)?

3.4 0.46 t-shirts; ice cream

Suppose that Paulie and Vinny each can produce ice cream or t-shirts. The table shows the quantity of each good that Paulie and Vinny each can produce in 1 hour, respectively, if they devote all of their time and effort into making the good. Round all answers to two decimal places. Chart: -Paulie: ice cream: 5.00 and t-shirts: 17.00 -Vinny: ice cream: 6.00 and t-shirts: 13.00 1. What is Paulie's opportunity cost of producing a cup of ice cream? 2. What is Vinny's opportunity cost of producing a t-shirt? 3. Paulie has a comparative advantage in ___ and Vinny has a comparative advantage in ___.

cake bread

The figures illustrate the production possibilities available to Kate and Sarah with eight hours of labor in their bakery. Answer the questions according to these figures. Chart: -Kate: breads: 4 and cakes: 8 - Sarah: breads: 12 and cakes: 9 1. Kate has a comparative advantage in ___. 2. Sarah has a comparative advantage in ___.

Germany has a comparative advantage in the production of televisions, while Korea has a comparative advantage in the production of personal computers.

The table shows the units of output a worker can produce per month in Germany and Korea for two different goods: televisions and personal computers. Use this table to answer the question. Chart: -One worker in Germany: # of televisions/month: 40 and # of personal computers/month: 10 -One worker in Korea: # of televisions/month: 16 and # of personal computers/month: 8 Which of the statements is true?

neither good both goods

These figures illustrate the production possibilities available to Kate and Sarah with eight hours of labor in their bakery. Answer the questions according to these figures. Chart: -Kate: breads: 4 and cakes: 8 - Sarah: breads: 12 and cakes: 9 1. Kate has an absolute advantage in ___. 2. Sarah has an absolute advantage in ___.

Jean Jean Vincent Jean

Vincent and Jean are two cooks who work in a village. Each of them can either bake cakes or make pizzas. Every ingredient is readily available to them, and the only scarce resource is the cooks' time. Vincent can bake 10 cakes or make 5 pizzas in an hour. Jean can bake 12 cakes or make 8 pizzas in an hour. Please answer the four questions. 1. Which cook has the absolute advantage in baking cakes? 2. Which cook has the absolute advantage in making pizzas? 3. Which cook has the comparative advantage in baking cakes? 4. Which cook has the comparative advantage in making pizzas?

absolute advantage

Which term best describes the situation that, relative to England, France can produce beef at a lower cost of production (i.e., can produce beef using fewer inputs)?