Subjective Short Answer
1. Suppose that Venezuela produces beef and oil and it can switch production between each at a constant rate. If the most
beef it can produce is 300 million pounds and the most oil it can produce is 50 million barrels, then what is the
opportunity cost of a pound of beef and what is the opportunity cost of a barrel of oil?
2. Charlotte can produce pork and beans and can switch between producing them at a constant rate. If it takes her 10 hours
to produce a pound of pork and 5 hours to produce a pound of beans, what is her opportunity cost of pork and what is her
opportunity cost of beans?
Scenario 3-1
The production possibilities frontiers below show how much Greg and Catherine can each produce in 8 hours of time.
Greg’s Production Possibilities
Catherine’s Production Possibilities
3. Refer to Scenario 3-1. What is Greg’s opportunity cost of producing ice cream? Explain how you derived your answer.
4. Refer to Scenario 3-1. What is Greg’s opportunity cost of producing cake? Explain how you derived your answer.
5. Refer to Scenario 3-1. What is Catherine’s opportunity cost of producing ice cream? Explain how you derived your
answer.
6. Refer to Scenario 3-1. What is Catherine’s opportunity cost of producing cake? Explain how you derived your answer.
7. Refer to Scenario 3-1. Which if any good(s) does Greg have an absolute advantage producing?
8. Refer to Scenario 3-1. Which if any good(s) does Catherine have an absolute advantage producing?
9. Refer to Scenario 3-1. Is it possible for Greg and Catherine to gain from trade? Defend your answer.
10. Under what conditions is an economy’s production possibilities frontier also its consumption possibilities frontier?
11. What does a production possibilities frontier represent?
12. What does a consumption possibilities frontier represent?
13. Define absolute advantage.
14. Define comparative advantage.
15. Jennifer takes 2 hours to make a loaf of bread and 1 hour to make a dozen cookies. Janet takes 3 hours to make a loaf
of bread and 3/4 hours to make a dozen cookies. Who, if either, has an absolute advantage baking bread? Who, if either,
has an absolute advantage making cookies?
16. Frank can make 20 hot dogs an hour or 10 pints of potato salad an hour. Earnest can make 30 hot dogs an hour or 20
pints of potato salad an hour. Who has the comparative advantage making hot dogs and who has the comparative
advantage making potato salad?
17. Refer to Scenario 3-2. Which country, if either, has an absolute advantage producing rice? Defend your answer.
18. Refer to Scenario 3-2. Which country, if either, has an absolute advantage producing broccoli? Defend your answer.
19. Refer to Scenario 3-2. Which country, if either, has a comparative advantage producing rice? Defend your answer
using the numbers given.
20. Refer to Scenario 3-2. Which country, if either, has a comparative advantage producing broccoli? Defend your
answer using the numbers given.
21. Refer to Scenario 3-2. Give a range of prices in terms of pounds of rice per pound of broccoli at which the two
countries would be both be willing to trade.
22. Mark can produce 24 footballs or 48 basketballs in 8 hours. Maria can produce 64 basketballs in 8 hours. In order for
Maria to have a comparative advantage producing basketballs, the number of footballs she can produce in 8 hours has to
be less than _____.
32.
23. It takes Heather 1 hour to change the oil in the car and 20 minutes to do the dishes. It takes Zach 1.5 hours to change
the oil in the car. For Zach to have a comparative advantage changing the oil it must take him more than ______ minutes
to do the dishes.
30
24. Tom’s opportunity cost of mowing a lawn is 2 loads of laundry. Jen’s opportunity cost of mowing a lawn is 1.5 loads
of laundry. What is the range of prices for mowing a lawn at which Tom and Jen could both benefit from trade?
25. Sally can make 8 cups of soup per hour or 20 crackers per hour. Harry can make 10 cups of soup per hour or 30
crackers per hour. Can Sally and Harry gain from trade? If so, what is the range of prices of crackers for soup at which
they would both find trade advantageous?
26. Economists use the term ______ to refer to the ability to produce a good using fewer inputs than another producer.
27. Economists use the term ______ to refer to the ability to produce a good at a lower opportunity cost than another
producer.
28. The gains from specialization and trade are based on ______ advantage.
Table 3-41
Quantity Produced in 4 Hours
Compass
Radio
Compass
Radio
Russia
30
15
8
16
England
20
5
12
48
29. Refer to Table 3-41. What is Russia’s opportunity cost of one compass?
2 radios.
30. Refer to Table 3-41. What is Russia’s opportunity cost of one radio?
0.5 compass.
31. Refer to Table 3-41. What is England’s opportunity cost of one compass?
4 radios.
32. Refer to Table 3-41. What is England’s opportunity cost of one radio?
0.25 compass.
33. Refer to Table 3-41. Which country has an absolute advantage in producing compasses?
34. Refer to Table 3-41. Which country has an absolute advantage in producing radios?
35. Refer to Table 3-41. Which country has a comparative advantage in producing compasses?
36. Refer to Table 3-41. Which country has a comparative advantage in producing radios?
37. Refer to Table 3-41. If the two countries decide to trade with each other, which country should specialize in
producing compasses?
38. Refer to Table 3-41. If the two countries decide to trade with each other, which country should specialize in
producing radios?
39. Refer to Table 3-41. If the two countries specialize and trade with each other, which country will import compasses?
40. Refer to Table 3-41. If the two countries specialize and trade with each other, which country will import radios?
Figure 3-26
Mary’s Production Possibilities Frontier Kate’s Production Possibilities Frontier
41. Refer to Figure 3-26. What is Mary’s opportunity cost of one muffin?
42. Refer to Figure 3-26. What is Mary’s opportunity cost of one cookie?
43. Refer to Figure 3-26. What is Kate’s opportunity cost of one muffin?
44. Refer to Figure 3-26. What is Kate’s opportunity cost of one cookie?
45. Refer to Figure 3-26. Who has a comparative advantage in making cookies?
46. Refer to Figure 3-26. Who has a comparative advantage in making muffins?
47. Refer to Figure 3-26. If Mary and Kate trade foods with each other, who will trade away muffins in exchange for
cookies?
48. Country A and country B both produce shirts and shorts. Country B has an absolute advantage producing both shirts
and shorts. Is there any condition under which the two countries could gain from trade?
49. With eight hours of work Elmer can produce 20 pounds of carrots or 15 pounds of peas. With eight hours Bugs can
produce 10 pounds of carrots or 7.5 pounds of peas. Can Elmer and Bugs gain from trade? Defend your answer.
50. If the U.S. could produce 5 televisions per hour of labor and China could produce 3 televisions per hour of labor,
would it necessarily follow that the U.S. should specialize in television production?
Explain your answer using the concepts of comparative and or absolute advantage.
51. Explain the difference between absolute advantage and comparative advantage. Which is more important in
determining trade patterns, absolute advantage or comparative advantage? Why?
52. The only two countries in the world, Alpha and Omega, face the following production possibilities frontiers.
Alpha’s Production Possibilities Frontier
Omega’s Production Possibilities Frontier
a.
Assume that each country decides to use half of its resources in the production of each
good. Show these points on the graphs for each country as point A.
b.
If these countries choose not to trade, what would be the total world production of
popcorn and peanuts?
c.
Now suppose that each country decides to specialize in the good in which each has a
comparative advantage. By specializing, what is the total world production of each
product now?
d.
If each country decides to trade 100 units of popcorn for 100 units of peanuts, show on
the graphs the gain each country would receive from trade. Label these points B.
a.
production possibilities frontier) and Omega would be producing 50 units of peanuts
and 150 units of popcorn (point A on its production possibilities frontier).
c.
The total world production of peanuts would now be 250 units and the total world
production of popcorn would now be 300 units.
trade 100 of them to Alpha, leaving Omega with 200 units of popcorn. Omega would
then receive 100 units of peanuts from Alpha.
53. Julia can fix a meal in 1 hour, and her opportunity cost of one hour is $50. Jacque can fix the same kind of meal in 2
hours, and his opportunity cost of one hour is $20. Will both Julia and Jacque be better off if she pays him $45 per meal to
fix her meals? Explain.
preparing a meal is $40, each of them will be better off by $5 per meal if this arrangement
54. Gary and Diane must prepare a presentation for their marketing class. As part of their presentation, they must do a
series of calculations and prepare 50 PowerPoint slides. It would take Gary 10 hours to do the required calculation and 10
hours to prepare the slides. It would take Diane 12 hours to do the calculations and 20 hours to prepare the slides.
a.
How much time would it take the two to complete the project if they divide the calculations
equally and the slides equally?
b.
How much time would it take the two to complete the project if they use comparative
advantage and specialize in calculating or preparing slides?
c.
If Diane and Gary have the same opportunity cost of $5 per hour, is there a better solution than
for each to specialize in calculating or preparing slides?
a.
If both tasks are divided equally, it will take 11 hours for the calculations and 15 hours
for the writing, for a total of 26 hours.
If Diane specializes in calculating and Gary specializes in preparing slides, it will take
off if Diane paid him between $50 and $60 dollars to do the calculations. In this case,
the total time spent on the project would be 20 hours.