742 Interdependence and the Gains from Trade
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.
Interdependence and the Gains from Trade 743
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.
744 Interdependence and the Gains from Trade
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?
Interdependence and the Gains from Trade 745
Scenario 3-2
In country A a worker who works 40 hours can produce 200 pounds of rice or 100 pounds of
broccoli. In country B a worker who works 40 hours can produce 160 pounds of rice or 120
pounds of broccoli.
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.
746 Interdependence and the Gains from Trade
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.
Interdependence and the Gains from Trade 747
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 .
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.
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?
748 Interdependence and the Gains 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.
Interdependence and the Gains from Trade 749
28. The gains from specialization and trade are based on advantage.
Table 3-41
Minutes Needed
to Make 1
Quantity Produced
in 4 Hours
Compass
Radio
Compass
Russia
30
15
8
England
20
5
12
29. Refer to Table 3-41. What is Russia’s opportunity cost of one compass?
30. Refer to Table 3-41. What is Russia’s opportunity cost of one radio?
750 Interdependence and the Gains from Trade
31. Refer to Table 3-41. What is England’s opportunity cost of one compass?
32. Refer to Table 3-41. What is England’s opportunity cost of one radio?
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?
Interdependence and the Gains from Trade 751
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?
752 Interdependence and the Gains from Trade
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?
Interdependence and the Gains from Trade 753
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?
754 Interdependence and the Gains from Trade
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?
Interdependence and the Gains from Trade 755
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.
756 Interdependence and the Gains from Trade
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.