ECON 2302 - Chapter 3

Trade between countries

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

Refer to Table 3-34. For which good(s) does Indonesia have a comparative advantage

rice but not bananas.

Refer to Table 3-30. Falda has an absolute advantage in the production of

wheat

Table 3-34 Assume that Indonesia and India can switch between producing rice and bananas at a constant rate. ​ Refer to Table 3-34. Indonesia's opportunity cost of producing bananas is

2.5 units of rice. This is higher than India's opportunity cost of producing bananas.

Refer to Figure 3-2. If the production possibilities frontier shown is for 24 hours of production, then how long does it take Brazil to make one cashew?

1/10 hour

Refer to Table 3-3. Assume that England and France each has 40 labor hours available. If each country divides its time equally between the production of cheese and wine, then total production is

24 units of cheese and 15 units of wine

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 the opportunity cost of 1 table is

6 chairs for Ken and 3 chairs for Traci.

Table 3-8 Assume that England and Spain can switch between producing cheese and producing bread at a constant rate. Refer to Table 3-8. Which of the following combinations of cheese and bread could Spain produce in 24 hours? a) 4 units of cheese and 3 units of bread. b) 6 units of cheese and 1 units of bread. c) 7 units of cheese and 1.5 units of bread. d) 3 units of cheese and 3 units of bread.

b) 6 units of cheese and 1 units of bread.

Refer to Table 3-3. Which of the following combinations of cheese and wine could France produce in 40 hours? a) 2 units of cheese and 20 units of wine b) 4 units of cheese and 15 units of wine c) 6 units of cheese and 5 units of wine d) 8 units of cheese and 20 units of wine

c) 6 units of cheese and 5 units of wine

Refer to Table 3-8. Which of the following combinations of cheese and bread could England not produce in 24 hours? a) 5 units of cheese and 3 units of bread. b) 6 units of cheese and 4 units of bread. c) 8 units of cheese and 3 units of bread. d) 7 units of cheese and 2 units of bread.

c) 8 units of cheese and 3 units of bread.

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 a comparative advantage in the production of

cloth

Refer to Table 3-3. Which of the following combinations of cheese and wine could England not produce in 40 hours? a) 12 units of cheese and 7 units of wine b) 16 units of cheese and 6 units of wine c) 20 units of cheese and 5 units of wine d) 26 units of cheese and 4 units of wine

d) 26 units of cheese and 4 units of wine

Refer to Figure 3-2. If the production possibilities frontier shown is for two months of production, then which of the following combinations of peanuts and cashews could Brazil produce in two months? a) 7 peanuts and 35 cashews b) 5 peanuts and 100 cashews c) 2 peanuts and 190 cashews d) 3 peanuts and 150 cashews

d) 3 peanuts and 150 cashews

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.

By definition, exports are

goods produced domestically and sold abroad.

Goods produced abroad and sold domestically are called

imports.

Refer to Table 3-3. We could use the information in the table to draw a production possibilities frontier for England and a second production possibilities frontier for France. If we were to do this, measuring cheese along the horizontal axis, then

the slope of England's production possibilities frontier would be -0.25 and the slope of France's production possibilities frontier would be -2.5.

Table 3-8 Assume that England and Spain can switch between producing cheese and producing bread at a constant rate. Refer to Table 3-8. We could use the information in the table to draw a production possibilities frontier for England and a second production possibilities frontier for Spain. If we were to do this, measuring cheese along the horizontal axis, then

the slope of England's production possibilities frontier would be -0.67 and the slope of Spain's production possibilities frontier would be -0.5.

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

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