5) The United States has an absolute advantage in producing sugar over all of the other
sugar producing countries. Does this fact mean that we should not import any sugar from
the other countries?
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Written and oral communication
6) Japan can use all of its resources to produce 100 videos or 400 shoes. China can use all
of its resources to produce 25 videos or 200 shoes. Which nation has the comparative
advantage in shoes and which nation has the comparative advantage in videos?
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Analytical thinking
7) The United States can use all of its resources to produce 50 computers or 4,000 shoes.
Suppose that at world market prices, one computer exchanges for 100 shoes. Explain how
the United States can gain from trade.
Skill: Level 4: Applying models
Section: Checkpoint 3.4
Status: Old
AACSB: Analytical thinking
109
8) The table above shows the amounts of cloth and cheese that China and Pakistan can
produce in an hour. Which country has the comparative advantage in cloth and which
country has the comparative advantage in cheese?
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Analytical thinking
110
9) Omar and John can ix computers or write computer programs. The table above shows
the number of computers they can ix and the lines of code they can write in a day.
a. Who, if anyone, has the absolute advantage?
b. Who has the comparative advantage in ixing computers? Why?
c. Who has the comparative advantage in writing programs? Why?
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Analytical thinking
111
10) Two nations can produce computers and software in the amounts given in the table
above. Does either nation have an absolute advantage in producing the products? Which
nation has a comparative advantage in computers? Which nation has a comparative
advantage in software? Explain your answers.
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Analytical thinking
112
11) The igure above shows Prakash’s and Gail’s production possibilities frontiers for
writing books and magazine articles.
a. What is Prakash’s opportunity cost of a book? What is Gail’s opportunity cost? Who has
the comparative advantage in writing books?
b. Who has the comparative advantage in writing magazine articles?
c. According to their comparative advantages, who should write books and who should
write magazine articles?
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Analytical thinking
113
12) “When countries specialize in producing the good in which they have a comparative
advantage and then trade with each other, only the country with the absolute advantage
gains.” Is the previous statement correct or incorrect? Briely explain your answer.
Skill: Level 2: Using deinitions
Section: Checkpoint 3.4
Status: Old
AACSB: Written and oral communication
13) “Because the United States is the largest economy in the world and can produce
anything it needs domestically, there are no gains from trade for the United States.” Is the
previous statement correct or incorrect?
Skill: Level 2: Using deinitions
Section: Checkpoint 3.4
Status: Old
AACSB: Relective thinking
14) How can a nation that is at an absolute disadvantage gain from trade?
Skill: Level 4: Applying models
Section: Checkpoint 3.4
Status: Old
AACSB: Written and oral communication
15) Why do nations engage in international trade?
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Written and oral communication
16) Explain why specialization and trade increases a country’s overall level of consumption.
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Analytical thinking
115