Chapter 3 Interdependence and the Gains from Trade
MULTIPLE CHOICE
1. People who provide you with goods and services
a.
are acting out of generosity.
b.
do so because they get something in return.
c.
have chosen not to become interdependent.
d.
are required to do so by the government.
2. When an economist points out that you and millions of other people are interdependent, he or she is referring
to the fact that we all
a.
rely upon the government to provide us with the basic necessities of life.
b.
rely upon one another for the goods and services we consume.
c.
have similar tastes and abilities.
d.
are concerned about one another’s well-being.
A PARABLE FOR THE MODERN ECONOMY
1. Which of the following is not a reason people choose to depend on others for goods and services?
a.
to improve their lives
b.
to allow them to enjoy a greater variety of goods and services
c.
to consume more of each good without working any more hours
d.
to allow people to produce outside their production possibilities frontiers
2. When can two countries gain from trading two goods?
a.
when the first country can only produce the first good and the second country can only produce the
second good
b.
when the first country can produce both goods, but can only produce the second good at great cost,
and the second country can produce both goods, but can only produce the first good at great cost
c.
when the first country is better at producing both goods and the second country is worse at
producing both goods
d.
Two countries could gain from trading two goods under all of the above conditions.
3. Regan grows flowers and makes ceramic vases. Jayson also grows flowers and makes ceramic vases, but Re-
gan is better at producing both goods. In this case, trade could
a.
benefit both Jayson and Regan.
b.
benefit Jayson, but not Regan.
c.
benefit Regan, but not Jayson.
d.
benefit neither Jayson nor Regan.
2 ❖ Chapter 3/Interdependence and the Gains from Trade
4. Ben bakes bread and Shawna knits sweaters. Ben and Shawna both like to eat bread and wear sweaters. In
which of the following cases is it impossible for both Ben and Shawna to benefit from trade?
a.
Ben cannot knit sweaters and Shawna cannot bake bread.
b.
Ben is better than Shawna at baking bread and Shawna is better than Ben at knitting sweaters.
c.
Ben is better than Shawna at baking bread and at knitting sweaters.
d.
Both Ben and Shawna can benefit from trade in all of the above cases.
5. Pocoyo bakes cookies and Pato grows vegetables. In which of the following cases is it impossible for both
Pocoyo and Pato to benefit from trade?
a.
Pocoyo does not like vegetables and Pato does not like cookies.
b.
Pocoyo is better than Pato at baking cookies and Pato is better than Pocoyo at growing vegetables.
c.
Pato is better than Pocoyo at baking cookies and at growing vegetables.
d.
Both Pocoyo and Pato can benefit from trade in all of the above cases.
6. The production possibilities frontier illustrates
a.
the combinations of output that an economy should produce.
b.
the combinations of output that an economy should consume.
c.
the combinations of output that an economy can produce.
d.
All of the above are correct.
7. An economy’s production possibilities frontier is also its consumption possibilities frontier
a.
under all circumstances.
b.
under no circumstances.
c.
when the economy is self-sufficient.
d.
when the rate of tradeoff between the two goods being produced is constant.
8. A production possibilities frontier is bowed outward when
a.
the more resources the economy uses to produce one good, the fewer resources it has available to
produce the other good.
b.
an economy is self-sufficient instead of interdependent and engaged in trade.
c.
the rate of tradeoff between the two goods being produced is constant.
d.
the rate of tradeoff between the two goods being produced depends on how much of each good is
being produced.
Chapter 3/Interdependence and the Gains from Trade ❖ 3
9. A production possibilities frontier is a straight line when
a.
the more resources the economy uses to produce one good, the fewer resources it has available to
produce the other good.
b.
an economy is interdependent and engaged in trade instead of self-sufficient.
c.
the rate of tradeoff between the two goods being produced is constant.
d.
the rate of tradeoff between the two goods being produced depends on how much of each good is
being produced.
10. Consider two individuals — Marquis and Serena — each of whom would like to wear sweaters and eat tasty
food. The gains from trade between Marquis and Serena are most obvious in which of the following cases?
a.
Marquis is very good at knitting sweaters and at cooking tasty food, but Serena’s skills in both of
these activities are very poor.
b.
Marquis and Serena both are very good at cooking tasty food, but neither has the necessary skills to
knit a sweater.
c.
Marquis’s cooking and knitting skills are very poor, and Serena’s cooking and knitting skills are
also very poor.
d.
Marquis’s skills are such that he can produce only sweaters, and Serena’s skills are such that she
can produce only tasty food.
11. Consider two individuals — Howard and Mai — each of whom would like to wear sweaters and eat tasty
food. The gains from trade between Howard and Mai are least obvious in which of the following cases?
a.
Howard is very good at knitting sweaters and at cooking tasty food, but Mai’s skills in both of
these activities are very poor.
b.
Howard is very good at knitting sweaters and at cooking tasty food; Mai is very good at knitting
sweaters, but she knows nothing about cooking tasty food.
c.
Howard’s skills in knitting sweaters are fairly good, but his skills in cooking tasty food are fairly
bad; Mai’s skills in knitting sweaters are fairly bad, but her skills in cooking tasty food are fairly
good.
d.
Howard’s skills are such that he can produce only sweaters, and Mai’s skills are such that she can
produce only tasty food.
12. A certain cowboy spends 10 hours per day mending fences and herding cattle. For the cowboy, a graph that
shows his various possible mixes of output (fences mended per day and cattle herded per day) is called his
a.
line of tastes.
b.
trade-off curve.
c.
production possibilities frontier.
d.
consumption possibilities frontier.
4 ❖ Chapter 3/Interdependence and the Gains from Trade
13. Suppose there are only two people in the world. Each person’s production possibilities frontier also represents
his or her consumption possibilities when
a.
neither person faces trade-offs.
b.
the frontiers are straight lines.
c.
the frontiers are bowed out.
d.
they choose not to trade with one another.
14. The most obvious benefit of specialization and trade is that they allow us to
a.
work more hours per week than we otherwise would be able to work.
b.
consume more goods than we otherwise would be able to consume.
c.
spend more money on goods that are beneficial to society, and less money on goods that are
harmful to society.
d.
consume more goods by forcing people in other countries to consume fewer goods.
15. As a student, Anne spends 40 hours per week writing term papers and completing homework assignments. On
one axis of her production possibilities frontier is measured the number of term papers written per week. On
the other axis is measured the number of homework assignments completed per week. Anne’s production
possibilities frontier is a straight line if
a.
she faces no trade-off between writing term papers and completing homework assignments.
b.
she can switch between writing term papers and completing homework assignments at a constant
rate.
c.
the rate at which she can switch between homework assignments and term papers depends on the
number of homework assignments she is completing and on the number of term papers she is
writing.
d.
she is required by her professors to spend half of her time on term papers and the other half of her
time on homework assignments.
16. For a self-sufficient producer, the production possibilities frontier
a.
is the same as the consumption possibilities frontier.
b.
is greater than the consumption possibilities frontier.
c.
is less than the consumption possibilities frontier.
d.
is always a straight line.
Chapter 3/Interdependence and the Gains from Trade ❖ 5
Table 3-1
Assume that Andia and Zardia can switch between producing wheat and producing beef at a constant rate.
Minutes Needed to Make 1
Bushel of Wheat
Pound of Beef
Andia
20
12
Zardia
15
10
17. Refer to Table 3-1. Assume that Andia and Zardia each has 360 minutes available. If each person divides his
time equally between the production of wheat and beef, then total production is
a.
10.5 bushels of wheat and 16.5 pounds of beef.
b.
21 bushels of wheat and 33 pounds of beef.
c.
35 bushels of wheat and 22 pounds of beef.
d.
42 bushels of wheat and 66 pounds of beef.
18. Refer to Table 3-1. Which of the following combinations of wheat and beef could Andia produce in one 8-
hour day?
a.
6 bushels of wheat and 35 pounds of beef
b.
9 bushels of wheat and 25 pounds of beef
c.
15 bushels of wheat and 20 pounds of beef
d.
24 bushels of wheat and 40 pounds of beef
19. Refer to Table 3-1. Which of the following combinations of wheat and beef could Zardia not produce in one
10-hour day?
a.
10 bushels of wheat and 45 pounds of beef
b.
20 bushels of wheat and 30 pounds of beef
c.
25 bushels of wheat and 25 pounds of beef
d.
30 bushels of wheat and 15 pounds of beef
6 ❖ Chapter 3/Interdependence and the Gains from Trade
Table 3-2
Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate.
Labor Hours
Needed to Make 1
Radio
Aruba
5
Iceland
4
20. Refer to Table 3-2. Which of the following represents Aruba’s production possibilities frontier when 100
labor hours are available?
a.
1 2 3 4 5 coolers
1
2
3
4
5
radios
c.
10 20 30 40 50 coolers
10
20
30
40
50
radios
b.
1 2 3 4 5 coolers
1
2
3
4
5
radios
d.
100 200 300 400 500 coolers
100
200
300
400
500
radios
Chapter 3/Interdependence and the Gains from Trade ❖ 7
21. Refer to Table 3-2. Which of the following represents Iceland’s production possibilities frontier when 100
labor hours are available?
a.
1 2 3 4 5 coolers
1
2
3
4
5
radios
c.
25 50 75 100 125 coolers
25
50
75
100
125
radios
b.
1 2 3 4 5 coolers
1
2
3
4
5
radios
d.
100 200 300 400 500 coolers
100
200
300
400
500
radios
22. Refer to Table 3-2. Assume that Aruba and Iceland each has 80 labor hours available. If each country di-
vides its time equally between the production of coolers and radios, then total production is
a.
28 coolers and 50 radios.
b.
30 coolers and 9 radios.
c.
60 coolers and 18 radios.
d.
120 coolers and 36 radios.
23. Refer to Table 3-2. Which of the following combinations of coolers and radios could Aruba produce in one
40-hour week?
a.
3 coolers and 7 radios
b.
5 coolers and 6 radios
c.
11 coolers and 4 radios
d.
13 coolers and 3 radios
Table 3-3
Assume that Zimbabwe and Portugal can switch between producing toothbrushes and producing hairbrushes at
a constant rate.
Machine Minutes
Needed to Make 1
Toothbrush
Hairbrush
Zimbabwe
3
10
Portugal
5
6
8 ❖ Chapter 3/Interdependence and the Gains from Trade
24. Refer to Table 3-3. Which of the following represents Zimbabwe’s and Portugal’s production possibilities
frontiers when each country has 60 minutes of machine time available?
a.
Zimbabwe Portugal
Toothbrushes
Hairbrushes
1 2 3 4 5
2
4
6
8
10
Toothbrushes
Hairbrushes
12345
2
4
6
8
10
b.
Zimbabwe Portugal
Toothbrushes
Hairbrushes
2 4 6 8 10
1
2
3
4
5
Toothbrushes
Hairbrushes
2 4 6 8 10
1
2
3
4
5
c.
Zimbabwe Portugal
Toothbrushes
Hairbrushes
36 72 108 144 180
100
200
300
400
500
600
Toothbrushes
Hairbrushes
100 200 300 400 500
72
144
216
288
360
432
d.
Zimbabwe Portugal
Toothbrushes
Hairbrushes
510 15 20 25
2
4
6
8
10
Toothbrushes
Hairbrushes
2 4 6 8 10
2
4
6
8
10
Chapter 3/Interdependence and the Gains from Trade ❖ 9
25. Refer to Table 3-3. Assume that Zimbabwe and Portugal each has 180 machine minutes available. If each
country divides its time equally between the production of toothbrushes and hairbrushes, then total production
is
a.
24 toothbrushes and 12 hairbrushes.
b.
48 toothbrushes and 24 hairbrushes.
c.
96 toothbrushes and 48 hairbrushes.
d.
720 toothbrushes and 1440 hairbrushes.
26. Refer to Table 3-3. Which of the following combinations of toothbrushes and hairbrushes could Portugal
produce in 30 minutes?
a.
1 toothbrush and 4 hairbrushes
b.
4 toothbrushes and 2 hairbrushes
c.
5 toothbrushes and 6 hairbrushes
d.
6 toothbrushes and 5 hairbrushes
27. Refer to Table 3-3. Which of the following combinations of toothbrushes and hairbrushes could Zimbabwe
not produce in 120 minutes?
a.
5 toothbrushes and 11 hairbrushes
b.
10 toothbrushes and 9 hairbrushes
c.
20 toothbrushes and 6 hairbrushes
d.
30 toothbrushes and 3 hairbrushes
Table 3-4
Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a
constant rate.
Labor Hours Needed
to Make 1 Pound of
Pounds Produced
in 24 Hours
Meat
Potatoes
Meat
Potatoes
Farmer
8
2
3
12
Rancher
3
6
8
4
28. Refer to Table 3-4. Assume that the farmer and the rancher each has 24 labor hours available. If
each person divides his time equally between the production of meat and potatoes, then total production is
a.
3 pounds of meat and 12 pounds of potatoes.
b.
5.5 pounds of meat and 8 pounds of potatoes.
c.
8 pounds of meat and 4 pounds of potatoes.
d.
11 pounds of meat and 16 pounds of potatoes.
10 ❖ Chapter 3/Interdependence and the Gains from Trade
29. Refer to Table 3-4. Which of the following combinations of meat and potatoes could the farmer produce in
24 hours?
a.
1 pound of meat and 8 pounds of potatoes.
b.
2 pounds of meat and 5 pounds of potatoes.
c.
3 pounds of meat and 12 pounds of potatoes.
d.
4 pounds of meat and 8 pounds of potatoes.
30. Refer to Table 3-4. Which of the following combinations of meat and potatoes could the rancher not produce
in 24 hours?
a.
2 pounds of meat and 3 pounds of potatoes.
b.
4 pounds of meat and 2 pounds of potatoes.
c.
6 pounds of meat and 1 pounds of potatoes.
d.
8 pounds of meat and 0.5 pound of potatoes.
Table 3-5
Assume that England and Spain can switch between producing cheese and producing bread at a constant rate.
Labor Hours Needed
to Make 1 Unit of
Number of Units
Produced in 40 Hours
Cheese
Bread
Cheese
Bread
England
1
4
40
10
Spain
4
8
10
5
31. Refer to Table 3-5. Assume that England and Spain each has 40 labor hours available. If each
country divides its time equally between the production of cheese and bread, then total production is
a.
20 units of cheese and 5 units of bread.
b.
25 units of cheese and 7.5 units of bread.
c.
40 units of cheese and 10 units of bread.
d.
50 units of cheese and 15 units of bread.
32. Refer to Table 3-5. Which of the following combinations of cheese and bread could Spain produce in 40
hours?
a.
2.25 units of cheese and 4 units of bread.
b.
5.5 units of cheese and 3 units of bread.
c.
7 units of cheese and 1.5 units of bread.
d.
10 units of cheese and 5 units of bread.
33. Refer to Table 3-5. Which of the following combinations of cheese and bread could England not produce in
40 hours?
a.
5 units of cheese and 9 units of bread.
b.
10 units of cheese and 7.5 units of bread.
c.
20 units of cheese and 5 units of bread.
d.
30 units of cheese and 2.5 units of bread.
Chapter 3/Interdependence and the Gains from Trade ❖ 11
34. Refer to Table 3-5. 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
a.
the slope of England’s production possibilities frontier would be –4 and the slope of Spain’s
production possibilities frontier would be –2.
b.
the slope of England’s production possibilities frontier would be –0.25 and the slope of Spain’s
production possibilities frontier would be -0.5.
c.
the slope of England’s production possibilities frontier would be 0.25 and the slope of Spain’s
production possibilities frontier would be 0.5.
d.
the slope of England’s production possibilities frontier would be 4 and the slope of Spain’s
production possibilities frontier would be 2.
35. Refer to Table 3-5. 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 bread along
the horizontal axis, then
a.
the slope of England’s production possibilities frontier would be –4 and the slope of Spain’s
production possibilities frontier would be –2.
b.
the slope of England’s production possibilities frontier would be -0.25 and the slope of Spain’s
production possibilities frontier would be -0.5.
c.
the slope of England’s production possibilities frontier would be 0.25 and the slope of Spain’s
production possibilities frontier would be 0.5.
d.
the slope of England’s production possibilities frontier would be 4 and the slope of Spain’s
production possibilities frontier would be 2.
Table 3-6
Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate.
Hours Needed
To Make 1
Amount Produced
in 40 Hours
mixer
toaster
mixers
toasters
Maya
8
5
5
8
Miguel
20
10
2
4
36. Refer to Table 3-6. Assume that Maya and Miguel each has 40 hours available. If each person divides
his/her time equally between the production of mixers and toasters, then total production is
a.
2 mixer and 8 toasters.
b.
3.5 mixers and 6 toasters.
c.
5 mixers and 4 toasters.
d.
7 mixers and 12 toasters.
12 ❖ Chapter 3/Interdependence and the Gains from Trade
37. Refer to Table 3-6. Which of the following combinations of mixers and toasters could Maya produce in 40
hours?
a.
1 mixers and 7 toasters.
b.
2 mixers and 5 toasters.
c.
2.5 mixers and 4 toasters.
d.
3 mixers and 4 toasters.
38. Refer to Table 3-6. Which of the following combinations of mixers and toasters could Miguel not produce in
90 hours?
a.
0 mixers and 4 toasters.
b.
1 mixer and 3 toasters.
c.
0.75 mixers and 2.5 toasters.
d.
2 mixers and 0 toasters.
39. Refer to Table 3-6. We could use the information in the table to draw a production possibilities frontier for
Maya and a second production possibilities frontier for Miguel. If we were to do this, measuring mixers along
the horizontal axis, then
a.
the slope of Maya’s production possibilities frontier would be –1.6 and the slope of Miguel’s
production possibilities frontier would be –2.
b.
the slope of Maya’s production possibilities frontier would be –0.625 and the slope of Miguel’s
production possibilities frontier would be -0.5.
c.
the slope of Maya’s production possibilities frontier would be 0.625 and the slope of Miguel’s
production possibilities frontier would be 0.5.
d.
the slope of Maya’s production possibilities frontier would be 1.6 and the slope of Miguel’s
production possibilities frontier would be 2.
40. Refer to Table 3-6. We could use the information in the table to draw a production possibilities frontier for
Maya and a second production possibilities frontier for Miguel. If we were to do this, measuring toasters
along the horizontal axis, then
a.
the slope of Maya’s production possibilities frontier would be –1.6 and the slope of Miguel’s
production possibilities frontier would be –2.
b.
the slope of Maya’s production possibilities frontier would be –0.625 and the slope of Miguel’s
production possibilities frontier would be -0.5.
c.
the slope of Maya’s production possibilities frontier would be 0.625 and the slope of Miguel’s
production possibilities frontier would be 0.5.
d.
the slope of Maya’s production possibilities frontier would be 1.6 and the slope of Miguel’s
production possibilities frontier would be 2.
Chapter 3/Interdependence and the Gains from Trade ❖ 13
Table 3-7
Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate.
Hours Needed
to Make 1
Quantity Produced
in 2400 Hours
Car
Airplane
Cars
Airplanes
Japan
30
150
80
16
Korea
50
150
48
16
41. Refer to Table 3-7. Assume that Japan and Korea each has 2400 hours available. If each country divides its
time equally between the production of cars and airplanes, then total production is
a.
40 cars and 8 airplanes.
b.
64 cars and 16 airplanes.
c.
80 cars and 16 airplanes.
d.
128 cars and 32 airplanes.
42. Refer to Table 3-7. We could use the information in the table to draw a production possibilities frontier for
Japan and a second production possibilities frontier for Korea. If we were to do this, measuring cars along the
horizontal axis, then
a.
the slope of Japan’s production possibilities frontier would be –5 and the slope of Korea’s
production possibilities frontier would be –3.
b.
the slope of Japan’s production possibilities frontier would be –0.2 and the slope of Korea’s
production possibilities frontier would be -0.33.
c.
the slope of Japan’s production possibilities frontier would be 0.2 and the slope of Korea’s
production possibilities frontier would be 0.33.
d.
the slope of Japan’s production possibilities frontier would be 5 and the slope of Korea’s
production possibilities frontier would be 3.
43. Refer to Table 3-7. We could use the information in the table to draw a production possibilities frontier for
Japan and a second production possibilities frontier for Korea. If we were to do this, measuring airplanes
along the horizontal axis, then
a.
the slope of Japan’s production possibilities frontier would be –5 and the slope of Korea’s
production possibilities frontier would be –3.
b.
the slope of Japan’s production possibilities frontier would be –0.2 and the slope of Korea’s
production possibilities frontier would be -0.33.
c.
the slope of Japan’s production possibilities frontier would be 0.2 and the slope of Korea’s
production possibilities frontier would be 0.33.
d.
the slope of Japan’s production possibilities frontier would be 5 and the slope of Korea’s
production possibilities frontier would be 3.
14 ❖ Chapter 3/Interdependence and the Gains from Trade
Table 3-8
Assume that Huang and Min can switch between producing parasols and producing porcelain plates at a
constant rate.
Labor Hours Needed
to Make 1
Quantity Produced
in 36 Hours
Parasol
Plate
Parasol
Plate
Huang
2
6
18
6
Min
2
4
18
9
44. Refer to Table 3-8. Assume that Huang and Min each has 36 labor hours available. If each person divides
his/her time equally between the production of parasols and plates, then total production is
a.
18 parasols and 6 plates.
b.
18 parasols and 7.5 plates.
c.
16 parasols and 12 plates.
d.
36 parasols and 15 plates.
45. Refer to Table 3-8. Which of the following points would not be on Huang‘s production possibilities frontier,
based on a 36-hour production period?
a.
(18 parasols, 0 plates)
b.
(12 parasols, 2 plates)
c.
(6 parasols, 4 plates)
d.
(2 parasols, 6 plates)
46. Refer to Table 3-8. Which of the following points would be on Min’s production possibilities frontier, based
on a 36-hour production period?
a.
(3 parasols, 8 plates)
b.
(8 parasols, 5 plates)
c.
(11 parasols, 4 plates)
d.
More than one of the above would be on Min’s production possibilities frontier.
Chapter 3/Interdependence and the Gains from Trade ❖ 15
Table 3-9
Barb and Jim run a business that sets up and tests computers. Assume that Barb and Jim can switch between
setting up and testing computers at a constant rate. The following table applies.
Minutes Needed to
Number of Computers
Set Up or Tested in a
40-Hour Week
Set Up 1
Computer
Test 1
Computer
Computers
Set Up
Computers
Tested
Barb
48
?
50
40
Jim
30
40
80
60
47. Refer to Table 3-9. The number of minutes needed by Barb to test a computer is
a.
36.
b.
48.
c.
60.
d.
64.
48. Refer to Table 3-9. Which of the following points would not be on Barb’s production possibilities frontier,
based on a 40-hour week?
a.
(0 computers set up, 40 computers tested)
b.
(8 computers set up, 32 computers tested)
c.
(25 computers set up, 20 computers tested)
d.
(30 computers set up, 16 computers tested)
49. Refer to Table 3-9. Which of the following points would not be on Jim’s production possibilities frontier,
based on a 40-hour week?
a.
(0 computers set up, 60 computers tested)
b.
(40 computers set up, 30 computers tested)
c.
(60 computers set up, 12 computers tested)
d.
(72 computers set up, 6 computers tested)
16 ❖ Chapter 3/Interdependence and the Gains from Trade
Table 3-10
Juanita and Shantala run a business that programs and tests cellular phones. Assume that Juanita and Shantala
can switch between programming and testing cellular phones at a constant rate. The following table applies.
Minutes Needed to
Number of Cellular Phones
Programmed or Tested in a
40-Hour Week
Program 1
Cellular Phone
Test 1
Cellular Phone
Cellular Phones
Programmed
Cellular Phones
Tested
Juanita
?
2
160
1200
Shantala
10
4
240
600
50. Refer to Table 3-10. The number of minutes needed by Juanita to program a cellular phone is
a.
4.
b.
5.
c.
7.5.
d.
15.
51. Refer to Table 3-10. Which of the following points would be on Juanita’s production possibilities frontier,
based on a 40-hour week?
a.
(120 cellular phones programmed, 295 cellular phones tested)
b.
(130 cellular phones programmed, 225 cellular phones tested)
c.
(140 cellular phones programmed, 155 cellular phones tested)
d.
Both (a) and (b) would be on Juanita’s production possibilities frontier.
52. Refer to Table 3-10. Which of the following points would be on Shantala’s production possibilities frontier,
based on a 40-hour week?
a.
(120 cellular phones programmed, 250 cellular phones tested)
b.
(180 cellular phones programmed, 150 cellular phones tested)
c.
(240 cellular phones programmed, 600 cellular phones tested)
d.
More than one of the above would be on Shantala’s production possibilities frontier.
Table 3-11
Assume that Falda and Varick can switch between producing wheat and producing cloth at a constant rate.
Quantity Produced in 1 Hour
Bushels of Wheat
Yards of Cloth
Falda
8
12
Varick
6
15
53. Refer to Table 3-11. Assume that Falda and Varick each has 1 hour available. If each person divides his
time equally between the production of wheat and cloth, then total production is
a.
4 bushels of wheat and 7.5 yards of cloth.
b.
7 bushels of wheat and 13.5 yards of cloth.
c.
8 bushels of wheat and 15 yards of cloth.
d.
14 bushels of wheat and 27 yards of cloth.
Chapter 3/Interdependence and the Gains from Trade ❖ 17
54. Refer to Table 3-11. Falda’s opportunity cost of one bushel of wheat is
a.
2/3 yard of cloth and Varick’s opportunity cost of one bushel of wheat is 2/5 yard of cloth.
b.
2/3 yard of cloth and Varick’s opportunity cost of one bushel of wheat is 5/2 yards of cloth.
c.
3/2 yards of cloth and Varick’s opportunity cost of one bushel of wheat is 2/5 yard of cloth.
d.
3/2 yards of cloth and Varick’s opportunity cost of one bushel of wheat is 5/2 yards of cloth.
55. Refer to Table 3-11. Falda’s opportunity cost of one yard of cloth is
a.
2/3 bushel of wheat and Varick’s opportunity cost of one yard of cloth is 2/5 bushel of wheat.
b.
2/3 bushel of wheat and Varick’s opportunity cost of one yard of cloth is 5/2 bushels of wheat.
c.
3/2 bushels of wheat and Varick’s opportunity cost of one yard of cloth is 2/5 bushel of wheat.
d.
3/2 bushels of wheat and Varick’s opportunity cost of one yard of cloth is 5/2 bushels of wheat.
Table 3-12
Labor Hours Needed to
Make 1 Pound of:
Amount
Produced in 40 hours
Meat
Potatoes
Meat
Potatoes
Farmer
8 hours/pound
5 hours/pound
5 pounds
8 pounds
Rancher
4 hours/pound
10 hours/pound
10 pounds
4 pounds
56. Refer to Table 3-12. Assume that the farmer and the rancher each has 40 labor hours available. If each per-
son divides his time equally between the production of meat and potatoes, then total production is
a.
5 pounds of meat and 4 pounds of potatoes.
b.
6 pounds of meat and 7.5 pounds of potatoes.
c.
7.5 pounds of meat and 6 pounds of potatoes.
d.
10 pounds of meat and 8 pounds of potatoes.
57. Refer to Table 3-12. Which of the following combinations of meat and potatoes could the farmer produce in
40 hours?
a.
1 pound of meat and 7 pounds of potatoes.
b.
2 pounds of meat and 5 pounds of potatoes.
c.
3 pounds of meat and 3 pounds of potatoes.
d.
4 pounds of meat and 2 pounds of potatoes.
18 ❖ Chapter 3/Interdependence and the Gains from Trade
58. Refer to Table 3-12. Which of the following combinations of meat and potatoes could the rancher not pro-
duce in 40 hours?
a.
2 pounds of meat and 3 pounds of potatoes.
b.
3 pounds of meat and 3 pounds of potatoes.
c.
4 pounds of meat and 2 pounds of potatoes.
d.
5 pounds of meat and 2 pound of potatoes.
Table 3-13
The following table contains some production possibilities for an economy for a given month.
Sweaters
Gloves
4
300
6
?
8
100
59. Refer to Table 3-13. If the production possibilities frontier is bowed outward, then “?” could be
a.
100.
b.
150.
c.
200.
d.
250.
60. Refer to Table 3-13. If the production possibilities frontier is a straight line, then “?” must be
a.
100.
b.
150.
c.
200.
d.
250.
Table 3-14
The following table contains some production possibilities for an economy for a given year.
Cars
Newspapers
10
400
12
360
14
?
61. Refer to Table 3-14. If the production possibilities frontier is bowed outward, then “?” could be
a.
340.
b.
330.
c.
320.
d.
310.
Chapter 3/Interdependence and the Gains from Trade ❖ 19
62. Refer to Table 3-14. If the production possibilities frontier is a straight line, then “?” must be
a.
340.
b.
330.
c.
320.
Table 3-15
The following table contains some production possibilities for an economy for a given month.
Bagels
Donuts
40
150
60
?
80
50
63. Refer to Table 3-15. If the production possibilities frontier is bowed outward, then “?” could be
a.
50.
b.
75.
c.
100.
d.
125.
64. Refer to Table 3-15. If the production possibilities frontier is a straight line, then “?” must be
a.
50.
b.
75.
c.
100.
d.
125.
d.
310.
20 ❖ Chapter 3/Interdependence and the Gains from Trade
Table 3-16 Summary of the Gains from Trade
Alice
Betty
Lemonade
(in pitchers)
Pizzas
Lemonade
(in pitchers)
Pizzas
Without Trade
Production and Consumption
200
100
180
180
With Trade
Production
400
0
0
300
Trade
Gives 193
Gets 110
Gets 193
Gives 110
Consumption
a
b
c
d
Gains from Trade
e
f
g
h
65. Refer to Table 3-16. The values in the table represent the amounts of lemonade and pizzas that Alice and
Betty can produce in one week without and with specialization and trade. What are Alice and Betty’s gains
from specialization and trade?
a.
Alice gains 7 pitchers of lemonade and 10 pizzas, while Betty gains 13 pitchers of lemonade and 10
pizzas.
b.
Alice gains 200 pitchers of lemonade and 100 pizzas, while Betty gains 180 pitchers of lemonade
and 180 pizzas.
c.
Alice gains 207 pitchers of lemonade and 110 pizzas, while Betty gains 193 pitchers of lemonade
and 190 pizzas.
d.
Alice gains 400 pitchers of lemonade and 0 pizzas, while Betty gains 0 pitchers of lemonade and
Figure 3-1
Panel (a)
Panel (b)
chairs
couches
chairs
couches
66. Refer to Figure 3-1. The rate of tradeoff between producing chairs and producing couches is constant in
a.
Panel (a).
b.
Panel (b).
c.
both Panel (a) and Panel (b).
d.
neither Panel (a) nor Panel (b).
300 pizzas.