homework 3

As long as two people have different opportunity costs, each can gain from trade with the other, since trade allows each person to obtain a good at a price lower than his or her opportunity cost.

true

Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate. Without trade, the farmer produced and consumed 2 pounds of meat and 4 pounds of potatoes and the rancher produced and consumed 4 pounds of meat and 2 pounds of potatoes. Then, each person agreed to specialize in the production of the good in which they have a comparative advantage and trade 3 pounds of meat for 6 pounds of potatoes. As a result , the farmer gained

1 pound of meat and 2 pounds of potatoes and the rancher gained 1 pound of meat and 4 pounds of potaotes

Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate. The opportunity cost of 1 pound of meat for the rancher is

1/2 pound of potatoes

Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate. The opportunity cost of 1 pound of potatoes for the farmer is

1/4 pound of meat

Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate. The opportunity cost of 1 pound of potatoes for the rancher is

2 pounds of meat

Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate. Refer to Table 3-4. The opportunity cost of 1 pound of meat for the farmer is

4 pounds of potatoes

Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate. Assume that the farmer and the rancher each has 24 labor hours available. If each person spends all his time producing the good in which he has a comparative advantage, then total production is

8 pounds of meat and 12 pounds of potatoes

If Korea is capable of producing either shoes or soccer balls or some combination of the two, then

Korea's opportunity cost of shoes is the inverse of its opportunity cost of soccer balls.

Trade between countries

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

Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate. Iceland should export

coolers and import radios

Which of the following would NOT result from all countries specializing according to the principle of comparative advantage?

each country's production possibilities frontier would shift inward

If a country has the comparative advantage in producing a product, then that country must also have the absolute advantage in producing that product.

false

A farmer has the ability to grow either corn or cotton or some combination of the two. Given no other information, it follows that the farmer's opportunity cost of a bushel of corn multiplied by his opportunity cost of a bushel of cotton

is equal to 1

Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate. The rancher has a comparative advantage in the production of

meat

Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate. The rancher has an absolute advantage in the production of

meat

Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate. The farmer has a comparative advantage in the production of

potatoes

Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate. The farmer has an absolute advantage in the production of

potatoes

Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate. The farmer should specialize in the production of

potatoes and the rancher should specialize in the production of meat

Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate. Aruba should export?

radios and import coolers

Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate. Assume that the farmer and the rancher each has 24 labor hours available. If each person spends all his time producing the good in which he has a comparative advantage and trade takes place at a price of 1 pound of meat for 2 pounds of potatoes, then

the farmer and the rancher will both gain from this trade.