Chapter 3/Interdependence and the Gains from Trade ❖ 41
38. Which of the following statements is not correct?
a.
Trade allows for specialization.
b.
Trade has the potential to benefit all nations.
c.
Trade allows nations to consume outside of their production possibilities curves.
d.
Absolute advantage is the driving force of specialization.
39. Assume that Greece has a comparative advantage in fish and Germany has a comparative advantage in cars.
Also assume that Germany has an absolute advantage in both fish and cars. If these two countries specialize
and trade so as to maximize the benefits of specialization and trade, then
a.
the two countries’ combined output of both goods will be higher than it would be in the absence of
trade.
b.
Greece will produce more fish than it would produce in the absence of trade.
c.
Germany will produce more cars than it would produce in the absence of trade.
d.
All of the above are correct.
40. Suppose that a worker in Radioland can produce either 4 radios or 1 television per year and a worker in Teev-
eeland can produce either 2 radios or 5 televisions per year. Each nation has 100 workers, and each country
specializes according to the principle of comparative advantage. If Radioland trades 100 televisions to Teev-
eeland in exchange for 100 radios each year, then each country’s maximum consumption of new radios and
televisions per year will be
a.
higher than it would be in the absence of trade because of the gains from trade.
b.
the same as it would be in the absence of trade.
c.
less than it would be in the absence of trade because neither country is specializing in the product in
which it has a comparative advantage.
d.
less than it would be in the absence of trade because Teeveeland has an absolute advantage in both
goods and so it cannot benefit by trading with Radioland.
41. Suppose that a worker in Radioland can produce either 4 radios or 1 television per year, and a worker in Teev-
eeland can produce either 2 radios or 4 televisions per year. Each nation has 100 workers. Also suppose that
each country completely specializes in producing the good in which it has a comparative advantage. If Radio-
land trades 100 radios to Teeveeland in exchange for 100 televisions each year, then each country’s maximum
consumption of new radios and televisions per year will be
a.
100 radios, 300 televisions in Radioland and 300 radios, 100 televisions in Teeveeland.
b.
300 radios, 100 televisions in Radioland and 100 radios, 300 televisions in Teeveeland.
c.
200 radios, 100 televisions in Radioland and 100 radios, 200 televisions in Teeveeland.
d.
300 radios, 100 televisions in Radioland and 100 radios, 400 televisions in Teeveeland.
42 ❖ Chapter 3/Interdependence and the Gains from Trade
42. Suppose that a worker in Freedonia can produce either 6 units of corn or 2 units of wheat per year, and a
worker in Sylvania can produce either 2 units of corn or 6 units of wheat per year. Each nation has 10 workers.
Without trade, Freedonia produces and consumes 30 units of corn and 10 units of wheat per year. Sylvania
produces and consumes 10 units of corn and 30 units of wheat. Suppose that trade is then initiated between
the two countries, and Freedonia sends 30 units of corn to Sylvania in exchange for 30 units of wheat. Free-
donia will now be able to consume a maximum of
a.
30 units of corn and 30 units of wheat.
b.
40 units of corn and 30 units of wheat.
c.
40 units of corn and 20 units of wheat.
d.
10 units of corn and 40 units of wheat.
43. Suppose that a worker in Freedonia can produce either 6 units of corn or 2 units of wheat per year, and a
worker in Sylvania can produce either 2 units of corn or 6 units of wheat per year. Each nation has 10 workers.
Without trade, Freedonia produces and consumes 30 units of corn and 10 units of wheat per year. Sylvania
produces and consumes 10 units of corn and 30 units of wheat. Suppose that trade is then initiated between
the two countries, and Freedonia sends 30 units of corn to Sylvania in exchange for 30 units of wheat. Sylva-
nia will now be able to consume a maximum of
a.
30 units of corn and 30 units of wheat.
b.
40 units of corn and 30 units of wheat.
c.
40 units of corn and 20 units of wheat.
d.
10 units of corn and 40 units of wheat.
44. Suppose that a worker in Agland can produce either 10 units of organic grain or 2 units of incense per year,
and a worker in Zenland can produce either 5 units of organic grain or 15 units of incense per year. There are
20 workers in Agland and 10 workers in Zenland. Currently the two countries do not trade. Agland produces
and consumes 100 units of grain and 20 units of incense per year. Zenland produces and consumes 50 units of
grain and no incense per year. If each country made the decision to specialize in producing the good in which
it has a comparative advantage, then the combined yearly output of the two countries would increase by
a.
30 units of grain and 100 units of incense.
b.
30 units of grain and 150 units of incense.
c.
50 units of grain and 90 units of incense.
d.
50 units of grain and 130 units of incense.
45. Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a
worker in Oatland can grow either 5 bushels of corn or 50 bushels of oats per year. There are 20 workers in
Cornland and 20 workers in Oatland. If the two countries do not trade, Cornland will produce and consume
400 bushels of corn and 100 bushels of oats, while Oatland will produce and consume 60 bushels of corn and
400 bushels of oats. If each country made the decision to specialize in producing the good in which it has a
comparative advantage, then the combined yearly output of the two countries would increase by
a.
280 bushels of corn and 450 bushels of oats.
b.
340 bushels of corn and 500 bushels of oats.
c.
360 bushels of corn and 520 bushels of oats.
d.
360 bushels of corn and 640 bushels of oats.
Chapter 3/Interdependence and the Gains from Trade ❖ 43
46. Suppose that a worker in Freedonia can produce either 6 units of corn or 2 units of wheat per year, and a
worker in Sylvania can produce either 2 units of corn or 6 units of wheat per year. Each nation has 10 workers.
For many years the two countries traded, each completely specializing according to their respective compara-
tive advantages. Now, however, war has broken out between them and all trade has stopped. Without trade,
Freedonia produces and consumes 30 units of corn and 10 units of wheat per year. Sylvania produces and
consumes 10 units of corn and 30 units of wheat. The war has caused the combined yearly output of the two
countries to decline by
a.
10 units of corn and 10 units of wheat.
b.
20 units of corn and 20 units of wheat.
c.
30 units of corn and 30 units of wheat.
d.
40 units of corn and 40 units of wheat.
47. Suppose that a worker in Caninia can produce either 2 blankets or 8 meals per day, and a worker in Felinia can
produce either 5 blankets or 1 meal per day. Each nation has 10 workers. For many years, the two countries
traded, each completely specializing according to their respective comparative advantages. Now war has bro-
ken out between them and all trade has stopped. Without trade, Caninia produces and consumes 10 blankets
and 40 meals per day and Felinia produces and consumes 25 blankets and 5 meals per day. The war has
caused the combined daily output of the two countries to decline by
a.
15 blankets and 35 meals.
b.
25 blankets and 40 meals.
c.
35 blankets and 45 meals.
d.
50 blankets and 80 meals.
48. A person can benefit from specialization and trade by obtaining a good at a price that is
a.
lower than his or her opportunity cost of that good.
b.
the same as his or her opportunity cost of that good.
c.
higher than his or her opportunity cost of that good.
d.
different than his or her opportunity cost of that good.
49. The gains from trade are
a.
evident in economic models, but seldom observed in the real world.
b.
evident in the real world, but impossible to capture in economic models.
c.
a result of more efficient resource allocation than would be observed in the absence of trade.
d.
based on the principle of absolute advantage.
50. Trade can make everybody better off because it
a.
increases cooperation among nations.
b.
allows people to specialize according to comparative advantage.
c.
requires some workers in an economy to be retrained.
d.
reduces competition among domestic companies.
44 ❖ Chapter 3/Interdependence and the Gains from Trade
51. If labor in Mexico is less productive than labor in the United States in all areas of production,
a.
then neither nation can benefit from trade.
b.
then Mexico can benefit from trade but the United States cannot.
c.
then the United States will have a comparative advantage relative to Mexico in the production of all
goods.
d.
then both Mexico and the United States still can benefit from trade.
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
52. Refer to Table 3-1. What is Andia’s opportunity cost of producing one pound of beef?
a.
3/5 bushel of wheat
b.
6/5 bushels of wheat
c.
4/3 bushels of wheat
d.
5/3 bushels of wheat
53. Refer to Table 3-1. What is Andia’s opportunity cost of producing one bushel of wheat?
a.
3/5 pound of beef
b.
6/5 pounds of beef
c.
4/3 pounds of beef
d.
5/3 pounds of beef
54. Refer to Table 3-1. What is Zardia’s opportunity cost of producing one bushel of wheat?
a.
2/3 pound of beef
b.
3/4 pound of beef
c.
5/6 pound of beef
d.
3/2 pounds of beef
55. Refer to Table 3-1. What is Zardia’s opportunity cost of producing one pound of beef?
a.
2/3 bushel of wheat
b.
3/4 bushel of wheat
c.
5/6 bushel of wheat
d.
3/2 bushels of wheat
Chapter 3/Interdependence and the Gains from Trade ❖ 45
56. Refer to Table 3-1. Andia has an absolute advantage in the production of
a.
wheat and Zardia has an absolute advantage in the production of beef.
b.
beef and Zardia has an absolute advantage in the production of wheat.
c.
both goods and Zardia has an absolute advantage in the production of neither good.
d.
neither good and Zardia has an absolute advantage in the production of both goods.
57. Refer to Table 3-1. Andia has a comparative advantage in the production of
a.
wheat and Zardia has a comparative advantage in the production of beef.
b.
beef and Zardia has a comparative advantage in the production of wheat.
c.
both goods and Zardia has a comparative advantage in the production of neither good.
d.
neither good and Zardia has a comparative advantage in the production of both goods.
58. Refer to Table 3-1. Andia should specialize in the production of
a.
wheat and Zardia should specialize in the production of beef.
b.
beef and Zardia should specialize in the production of wheat.
c.
both goods and Zardia should specialize in the production of neither good.
d.
neither good and Zardia should specialize in the production of both goods.
59. Refer to Table 3-1. Assume that Andia and Zardia each has 60 minutes available. If each person spends all
his time producing the good in which he has a comparative advantage, then total production is
a.
3 bushels of wheat and 6 pounds of beef.
b.
3.5 bushels of wheat and 5.5 pounds of beef.
c.
4 bushels of wheat and 5 pounds of beef.
d.
7 bushels of wheat and 11 pounds of beef.
60. Refer to Table 3-1. At which of the following prices would both Andia and Zardia gain from trade with each
other?
a.
6 bushels of wheat for 10.5 pounds of beef
b.
12 bushels of wheat for 19 pounds of beef
c.
24 bushels of wheat for 34 pounds of beef
d.
Andia and Zardia could not both gain from trade with each other at any price.
46 ❖ 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
Cooler
Radio
Aruba
2
5
Iceland
1
4
61. Refer to Table 3-2. Aruba’s opportunity cost of one cooler is
a.
0.4 radio and Iceland’s opportunity cost of one cooler is 0.25 radio.
b.
0.4 radio and Iceland’s opportunity cost of one cooler is 4 radios.
c.
2.5 radios and Iceland’s opportunity cost of one cooler is 0.25 radio.
d.
2.5 radios and Iceland’s opportunity cost of one cooler is 4 radios.
62. Refer to Table 3-2. Suppose Aruba decides to increase its production of radios by 10. What is the opportuni-
ty cost of this decision?
a.
0.25 coolers
b.
2.5 coolers
c.
4 coolers
d.
25 coolers
63. Refer to Table 3-2. Aruba has an absolute advantage in the production of
a.
coolers and Iceland has an absolute advantage in the production of radios.
b.
radios and Iceland has an absolute advantage in the production of coolers.
c.
both goods and Iceland has an absolute advantage in the production of neither good.
d.
neither good and Iceland has an absolute advantage in the production of both goods.
64. Refer to Table 3-2. Aruba has a comparative advantage in the production of
a.
coolers and Iceland has a comparative advantage in the production of radios.
b.
radios and Iceland has a comparative advantage in the production of coolers.
c.
both goods and Iceland has a comparative advantage in the production of neither good.
d.
neither good and Iceland has a comparative advantage in the production of both goods.
65. Refer to Table 3-2. Aruba should specialize in the production of
a.
coolers and Iceland should specialize in the production of radios.
b.
radios and Iceland should specialize in the production of coolers.
c.
both goods and Iceland should specialize in the production of neither good.
d.
neither good and Iceland should specialize in the production of both goods.
66. Refer to Table 3-2. Assume that Aruba and Iceland each has 80 labor hours available. Originally, each coun-
try divided its time equally between the production of coolers and radios. Now, each country spends all its
Chapter 3/Interdependence and the Gains from Trade ❖ 47
time producing the good in which it has a comparative advantage. As a result, the total output of coolers in-
creased by
a.
20.
b.
40.
c.
60.
d.
80.
67. Refer to Table 3-2. At which of the following prices would both Aruba and Iceland gain from trade with
each other?
a.
2 radios for 4 coolers
b.
2 radio for 6 coolers
c.
2 radio for 10 coolers
d.
Aruba and Iceland could not both gain from trade with each other at any price.
68. Refer to Table 3-2. Aruba and Iceland would not be able to gain from trade if Iceland’s opportunity cost of
one radio changed to
a.
0 coolers.
b.
0.25 coolers.
c.
2.5 coolers.
d.
Aruba and Iceland can always gain from trade regardless of their opportunity costs.
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
69. Refer to Table 3-3. Zimbabwe’s opportunity cost of one hairbrush is
a.
3/10 toothbrush and Portugal’s opportunity cost of one hairbrush is 5/6 toothbrush.
b.
3/10 toothbrush and Portugal’s opportunity cost of one hairbrush is 6/5 toothbrushes.
c.
10/3 toothbrushes and Portugal’s opportunity cost of one hairbrush is 5/6 toothbrush.
d.
10/3 toothbrushes and Portugal’s opportunity cost of one hairbrush is 6/5 toothbrushes.
48 ❖ Chapter 3/Interdependence and the Gains from Trade
70. Refer to Table 3-3. Suppose Zimbabwe decides to increase its production of toothbrushes by 10. What is the
opportunity cost of this decision?
a.
0.3 hairbrush
b.
3 hairbrushes
c.
30 hairbrushes
d.
100 hairbrushes
71. Refer to Table 3-3. Zimbabwe has an absolute advantage in the production of
a.
toothbrushes and a comparative advantage in the production of toothbrushes.
b.
toothbrushes and a comparative advantage in the production of hairbrushes.
c.
hairbrushes and a comparative advantage in the production of toothbrushes.
d.
hairbrushes and a comparative advantage in the production of hairbrushes.
72. Refer to Table 3-3. Portugal has an absolute advantage in the production of
a.
toothbrushes and a comparative advantage in the production of toothbrushes.
b.
toothbrushes and a comparative advantage in the production of hairbrushes.
c.
hairbrushes and a comparative advantage in the production of toothbrushes.
d.
hairbrushes and a comparative advantage in the production of hairbrushes.
73. Refer to Table 3-3. Assume that Zimbabwe and Portugal each has 60 machine minutes available. Originally,
each country divided its time equally between the production of toothbrushes and hairbrushes. Now, each
country spends all its time producing the good in which it has a comparative advantage. As a result, the total
output increased by
a.
4 toothbrushes and 2 hairbrushes.
b.
10 toothbrushes and 5 hairbrushes.
c.
16 toothbrushes and 8 hairbrushes.
d.
20 toothbrushes and 10 hairbrushes.
74. Refer to Table 3-3. Zimbabwe and Portugal would not be able to gain from trade if Zimbabwe’s opportunity
cost of one toothbrush changed to
a.
0 hairbrushes.
b.
5/6 hairbrushes.
c.
6/5 hairbrushes.
d.
Zimbabwe and Portugal can always gain from trade regardless of their opportunity costs.
Chapter 3/Interdependence and the Gains from Trade ❖ 49
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
75. Refer to Table 3-4. The opportunity cost of 1 pound of meat for the farmer is
a.
1/4 pound of potatoes.
b.
1/4 hour of labor.
c.
4 pounds of potatoes.
d.
8 hours of labor.
76. Refer to Table 3-4. The opportunity cost of 1 pound of meat for the rancher is
a.
1/2 pound of potatoes.
b.
2 hours of labor.
c.
2 pounds of potatoes.
d.
3 hours of labor.
77. Refer to Table 3-4. The opportunity cost of 1 pound of potatoes for the farmer is
a.
1/4 pound of meat.
b.
2 hours of labor.
c.
4 pounds of meat.
d.
8 hours of labor.
78. Refer to Table 3-4. The opportunity cost of 1 pound of potatoes for the rancher is
a.
1/2 pound of meat.
b.
1/2 hour of labor.
c.
2 pounds of meat.
d.
6 hours of labor.
79. Refer to Table 3-4. The farmer has an absolute advantage in the production of
a.
meat.
b.
potatoes.
c.
both goods.
d.
neither good.
50 ❖ Chapter 3/Interdependence and the Gains from Trade
80. Refer to Table 3-4. The rancher has an absolute advantage in the production of
a.
meat.
b.
potatoes.
c.
both goods.
d.
neither good.
81. Refer to Table 3-4. The farmer has a comparative advantage in the production of
a.
meat.
b.
potatoes.
c.
both goods.
d.
neither good.
82. Refer to Table 3–4. The rancher has a comparative advantage in the production of
a.
meat.
b.
potatoes.
c.
both goods.
d.
neither good.
83. Refer to Table 3-4. The farmer should specialize in the production of
a.
meat and the rancher should specialize in the production of potatoes.
b.
potatoes and the rancher should specialize in the production of meat.
c.
both goods and the rancher should specialize in the production of neither good.
d.
neither good and the rancher should specialize in the production of both goods.
84. Refer to Table 3-4. 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
a.
3 pounds of meat and 4 pounds of potatoes.
b.
8 pounds of meat and 12 pounds of potatoes.
c.
11 pounds of meat and 16 pounds of potatoes.
d.
15 pounds of meat and 12 pounds of potatoes.
85. Refer to Table 3-4. 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
a.
the farmer and the rancher will both gain from this trade.
b.
the farmer will gain from this trade, but the rancher will not.
c.
the rancher will gain from this trade, but the farmer will not.
d.
neither the farmer nor the rancher will gain from this trade.
Chapter 3/Interdependence and the Gains from Trade ❖ 51
86. Refer to Table 3-4. 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 per-
son 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
a.
1 pound of meat and 2 pounds of potatoes and the rancher gained 0 pounds of meat and 5 pounds of
potatoes.
b.
1 pound of meat and 2 pounds of potatoes and the rancher gained 1 pound of meat and 4 pounds of
potatoes.
c.
3 pounds of meat and 6 pounds of potatoes and the rancher gained 5 pounds of meat and 6 pounds
of potatoes.
d.
4 pounds of meat and 12 pounds of potatoes and the rancher gained 6 pounds of meat and 8 pounds
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
87. Refer to Table 3-5. The opportunity cost of 1 unit of cheese for England is
a.
1/4 unit of bread.
b.
1 hour of labor.
c.
4 units of bread.
d.
4 hours of labor.
88. Refer to Table 3-5. The opportunity cost of 1 unit of cheese for Spain is
a.
1/2 unit of bread.
b.
2 hours of labor.
c.
2 units of bread.
d.
4 hours of labor.
89. Refer to Table 3-5. The opportunity cost of 1 unit of bread for England is
a.
1/4 unit of cheese.
b.
1/4 hour of labor.
c.
4 units of cheese.
d.
4 hours of labor.
of potatoes.
52 ❖ Chapter 3/Interdependence and the Gains from Trade
90. Refer to Table 3-5. The opportunity cost of 1 unit of bread for Spain is
a.
1/2 unit of cheese.
b.
1/2 hour of labor.
c.
2 units of cheese.
d.
8 hours of labor.
91. Refer to Table 3-5. England has an absolute advantage in the production of
a.
cheese and Spain has an absolute advantage in the production of bread.
b.
bread and Spain has an absolute advantage in the production of cheese.
c.
both goods and Spain has an absolute advantage in the production of neither good.
d.
neither good and Spain has an absolute advantage in the production of both goods.
92. Refer to Table 3-5. England has a comparative advantage in the production of
a.
cheese and Spain has a comparative advantage in the production of bread.
b.
bread and Spain has a comparative advantage in the production of cheese.
c.
both goods and Spain has a comparative advantage in the production of neither good.
d.
neither good and Spain has a comparative advantage in the production of both goods.
93. Refer to Table 3-5. England should specialize in the production of
a.
cheese and Spain should specialize in the production of bread.
b.
bread and Spain should specialize in the production of cheese.
c.
both goods and Spain should specialize in the production of neither good.
d.
neither good and Spain should specialize in the production of both goods.
94. Refer to Table 3-5. Assume that England and Spain each has 40 labor hours available. Originally, each
country divided its time equally between the production of cheese and bread. Now, each country spends all its
time producing the good in which it has a comparative advantage. As a result, the total output of cheese in-
creased by
a.
15.
b.
20.
c.
25.
d.
40.
95. Refer to Table 3-5. At which of the following prices would both England and Spain gain from trade with
each other?
a.
16 units of bread for 16 units of cheese
b.
16 units of bread for 24 units of cheese
c.
16 units of bread for 48 units of cheese
d.
England and Spain could not both gain from trade with each other at any price.
Chapter 3/Interdependence and the Gains from Trade ❖ 53
96. Refer to Table 3-5. If England and Spain each spends all its time producing the good in which it has a com-
parative advantage and the countries agree to trade 2 units of bread for 6 units of cheese, then England will
consume
a.
34 units of cheese and 2 units of bread and Spain will consume 6 units of cheese and 3 units of
bread.
b.
34 units of cheese and 2 units of bread and Spain will consume 16 units of cheese and 3 units of
bread.
c.
34 units of cheese and 12 units of bread and Spain will consume 6 units of cheese and 3 units of
bread.
d.
34 units of cheese and 12 units of bread and Spain will consume 16 units of cheese and 3 units of
bread.
97. Refer to Table 3-5. Without trade, England produced and consumed 32 units of cheese and 2 units of bread
and Spain produced and consumed 6 units of cheese and 2 units of bread. Then, each country agreed to spe-
cialize in the production of the good in which it has a comparative advantage and trade 7 units of cheese for
2.5 units of bread. As a result, England gained
a.
0 units of cheese and 0.5 unit of bread and Spain gained 1 unit of cheese and 0.5 unit of bread.
b.
1 unit of cheese and 0.5 unit of bread and Spain gained 1 unit of cheese and 0.5 unit of bread.
c.
7 units of cheese and 2.5 units of bread and Spain gained 7 units of cheese and 2.5 units of bread.
d.
33 units of cheese and 2.5 units of bread and Spain gained 7 units of cheese and 2.5 units of bread.
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
98. Refer to Table 3-6. The opportunity cost of 1 mixer for Maya is
a.
0.625 toasters.
b.
5 hours of labor.
c.
1.6 toasters.
d.
20 hours of labor.
99. Refer to Table 3-6. The opportunity cost of 1 mixer for Miguel is
a.
1/2 toaster.
b.
1/2 hour of labor.
c.
2 toasters.
d.
8 hours of labor.
54 ❖ Chapter 3/Interdependence and the Gains from Trade
100. Refer to Table 3-6. The opportunity cost of 1 toaster for Maya is
a.
0.625 mixers.
b.
1.6 hours of labor.
c.
1.6 mixers.
d.
8 hours of labor.
101. Refer to Table 3-6. The opportunity cost of 1 toaster for Miguel is
a.
1/2 mixer.
b.
2 hours of labor.
c.
2 mixers.
d.
20 hours of labor.
102. Refer to Table 3-6. Maya has an absolute advantage in the production of
a.
both goods and a comparative advantage in the production of mixers.
b.
both goods and a comparative advantage in the production of toasters.
c.
neither good and a comparative advantage in the production of mixers.
d.
neither good and a comparative advantage in the production of toasters.
103. Refer to Table 3-6. Miguel has an absolute advantage in the production of
a.
both goods and a comparative advantage in the production of mixers.
b.
both goods and a comparative advantage in the production of toasters.
c.
neither good and a comparative advantage in the production of mixers.
d.
neither good and a comparative advantage in the production of toasters.
104. Refer to Table 3-6. Maya should specialize in the production of
a.
mixers and Miguel should specialize in the production of toasters.
b.
toasters and Miguel should specialize in the production of mixers.
c.
both goods and Miguel should specialize in the production of neither good.
d.
neither good and Miguel should specialize in the production of both goods.
105. Refer to Table 3-6. At which of the following prices would both Maya and Miguel gain from trade with each
other?
a.
4 mixers for 7 toasters
b.
8 mixers for 10 toasters
c.
12 mixers for 18 toasters
d.
Maya and Miguel could not both gain from trade with each other at any price.
Chapter 3/Interdependence and the Gains from Trade ❖ 55
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
106. Refer to Table 3-7. Japan’s opportunity cost of one airplane is
a.
1/5 car and Korea’s opportunity cost of one airplane is 1/3 car.
b.
1/5 car and Korea’s opportunity cost of one airplane is 3 cars.
c.
5 cars and Korea’s opportunity cost of one airplane is 1/3 car.
d.
5 cars and Korea’s opportunity cost of one airplane is 3 cars.
107. Refer to Table 3-7. Japan’s opportunity cost of one car is
a.
1/5 airplane and Korea’s opportunity cost of one car is 1/3 airplane.
b.
1/5 airplane and Korea’s opportunity cost of one car is 3 airplanes.
c.
5 airplanes and Korea’s opportunity cost of one car is 1/3 airplane.
d.
5 airplanes and Korea’s opportunity cost of one car is 3 airplanes.
108. Refer to Table 3-7. Suppose Japan decides to increase its production of cars by 45. What is the opportunity
cost of this decision?
a.
9 airplanes
b.
15 airplanes
c.
135 airplanes
d.
225 airplanes
109. Refer to Table 3-7. Suppose Korea decides to increase its production of cars by 18. What is the opportunity
cost of this decision?
a.
3 airplanes
b.
6 airplanes
c.
16 airplanes
d.
150 airplanes
110. Refer to Table 3-7. Japan has an absolute advantage in the production of
a.
cars and a comparative advantage in the production of cars.
b.
cars and a comparative advantage in the production of airplanes.
c.
neither good and a comparative advantage in the production of cars.
d.
neither good and a comparative advantage in the production of airplanes.
56 ❖ Chapter 3/Interdependence and the Gains from Trade
111. Refer to Table 3-7. Korea has an absolute advantage in the production of
a.
cars and a comparative advantage in the production of cars.
b.
cars and a comparative advantage in the production of airplanes.
c.
neither good and a comparative advantage in the production of cars.
d.
neither good and a comparative advantage in the production of airplanes.
112. Refer to Table 3-7. Assume that Japan and Korea each has 2400 hours available. Originally, each country
divided its time equally between the production of cars and airplanes. Now, each country spends all its time
producing the good in which it has a comparative advantage. As a result, the total output of cars increased by
a.
16.
b.
40.
c.
64.
d.
80.
113. Refer to Table 3-7. Japan and Korea would not be able to gain from trade if Korea’s opportunity cost of one
car changed to
a.
1/5 airplane.
b.
1/3 airplane.
c.
3 airplanes.
d.
5 airplanes.
114. Refer to Table 3-7. Assume that Japan and Korea each has 2400 hours available. If each country spends all
its time producing the good in which it has a comparative advantage and trade takes place at a price of 12 cars
for 6 airplanes, then
a.
Japan and Korea will both gain from this trade.
b.
Japan will gain from this trade, but Korea will not.
c.
Korea will gain from this trade, but Japan will not.
d.
neither Japan nor Korea will gain from this trade.
115. Refer to Table 3-7. Without trade, Japan produced and consumed 50 cars and 6 airplanes and Korea pro-
duced and consumed 27 cars and 7 airplanes. Then, each country agreed to specialize in the production of the
good in which it has a comparative advantage and trade 28 cars for 8 airplanes. As a result, Japan gained
a.
0 cars and 2 airplanes and Korea gained 1 car and 1 airplane.
b.
2 cars and 2 airplanes and Korea gained 1 car and 1 airplane.
c.
28 cars and 8 airplanes and Korea gained 28 cars and 8 airplanes.
d.
52 cars and 8 airplanes and Korea gained 28 cars and 8 airplanes.
Chapter 3/Interdependence and the Gains from Trade ❖ 57
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
116. Refer to Table 3-8. The opportunity cost of 1 parasol for Huang is
a.
1/3 plate.
b.
1/2 plate.
c.
3 plates.
d.
6 plates.
117. Refer to Table 3-8. The opportunity cost of 1 parasol for Min is
a.
1/3 plate.
b.
1/2 plate.
c.
2 plates.
d.
3 plates.
118. Refer to Table 3-8. The opportunity cost of 1 plate for Huang is
a.
1/3 parasol.
b.
1/2 parasol.
c.
3 parasols.
d.
4 parasols.
119. Refer to Table 3-8. The opportunity cost of 1 plate for Min is
a.
1/3 parasol.
b.
1/2 parasol.
c.
2 parasols.
d.
3 parasols.
120. Refer to Table 3-8. Huang has an absolute advantage in the production of
a.
parasols and a comparative advantage in the production of parasols.
b.
parasols and a comparative advantage in the production of plates.
c.
neither good and a comparative advantage in the production of parasols.
d.
neither good and a comparative advantage in the production of plates.
58 ❖ Chapter 3/Interdependence and the Gains from Trade
121. Refer to Table 3-8. Min has an absolute advantage in the production of
a.
plates and a comparative advantage in the production of plates.
b.
parasols and a comparative advantage in the production of plates.
c.
neither good and a comparative advantage in the production of parasols.
d.
neither good and a comparative advantage in the production of plates.
122. Refer to Table 3-8. Assume that Huang and Min each has 36 labor hours available. Originally, each person
divided his/her time equally between the production of parasols and plates. Now, each person spends all their
time producing the good in which they have a comparative advantage. As a result, the total output of plates
increased by
a.
0.
b.
1.5.
c.
3.
d.
9.
123. Refer to Table 3-8. At which of the following prices would both Huang and Min gain from trade with each
other?
a.
15 parasols for 10 plates
b.
15 parasols for 6 plates
c.
15 parasols for 3 plates
d.
Huang and Min could not both gain from trade with each other at any price.
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
124. Refer to Table 3-9. Barb’s opportunity cost of setting up one computer is testing
a.
4/5 computer and Jim’s opportunity cost of setting up one computer is testing 3/4 computer.
b.
4/5 computer and Jim’s opportunity cost of setting up one computer is testing 4/3 computers.
c.
5/4 computers and Jim’s opportunity cost of setting up one computer is testing 3/4 computer.
d.
5/4 computers and Jim’s opportunity cost of setting up one computer is testing 4/3 computers.
Chapter 3/Interdependence and the Gains from Trade ❖ 59
125. Refer to Table 3-9. Barb’s opportunity cost of testing one computer is setting up
a.
4/5 computer and Jim’s opportunity cost of testing one computer is setting up 3/4 computer.
b.
4/5 computer and Jim’s opportunity cost of testing one computer is setting up 4/3 computers.
c.
5/4 computers and Jim’s opportunity cost of testing one computer is setting up 3/4 computer.
d.
5/4 computers and Jim’s opportunity cost of testing one computer is setting up 4/3 computers.
126. Refer to Table 3-9. Barb has an absolute advantage in
a.
both setting up and testing computers and a comparative advantage in setting up computers.
b.
both setting up and testing computers and a comparative advantage in testing computers.
c.
neither setting up nor testing computers and a comparative advantage in setting up computers.
d.
neither setting up nor testing computers and a comparative advantage in testing computers.
127. Refer to Table 3-9. Jim has an absolute advantage in
a.
both setting up and testing computers and a comparative advantage in setting up computers.
b.
both setting up and testing computers and a comparative advantage in testing computers.
c.
neither setting up nor testing computers and a comparative advantage in setting up computers.
d.
neither setting up nor testing computers and a comparative advantage in testing computers.
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
128. Refer to Table 3-10. Juanita has an absolute advantage in
a.
programming cellular phones and a comparative advantage in programming cellular phones.
b.
programming cellular phones and a comparative advantage in testing cellular phones.
c.
testing cellular phones and a comparative advantage in programming cellular phones.
d.
testing cellular phones and a comparative advantage in testing cellular phones.
60 ❖ Chapter 3/Interdependence and the Gains from Trade
129. Refer to Table 3-10. Juanita’s opportunity cost of programming one cellular phone is testing
a.
7.5 cellular phones and Shantala’s opportunity cost of programming one cellular phone is testing
5/2 cellular phones.
b.
2/15 cellular phones and Shantala’s opportunity cost of programming one cellular phone is testing
5/2 cellular phones.
c.
7.5 cellular phones and Shantala’s opportunity cost of programming one cellular phone is testing
2/5 cellular phones.
d.
2/15 cellular phones and Shantala’s opportunity cost of programming one cellular phone is testing
2/5 cellular phones.
130. Refer to Table 3-10. Juanita’s opportunity cost of testing one cellular phone is programming
a.
0.133 cellular phones and Shantala’s opportunity cost of testing one cellular phone is programming
2.5 cellular phones.
b.
0.133 cellular phones and Shantala’s opportunity cost of testing one cellular phone is programming
0.4 cellular phones.
c.
7.5 cellular phones and Shantala’s opportunity cost of testing one cellular phone is programming
2.5 cellular phones.
d.
7.5 cellular phones and Shantala’s opportunity cost of testing one cellular phone is programming
0.4 cellular phones.
131. Refer to Table 3-10. Shantala has an absolute advantage in
a.
programming cellular phones and a comparative advantage in programming cellular phones.
b.
programming cellular phones and a comparative advantage in testing cellular phones.
c.
testing cellular phones and a comparative advantage in programming cellular phones.
d.
testing cellular phones and a comparative advantage in testing cellular phones.
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
132. Refer to Table 3-11. Falda has an absolute advantage in the production of
a.
wheat.
b.
cloth.
c.
both goods.
d.
neither good.