CH3: Interdependence and the gains from trade

Question 1

Before Frank and Ruby engage in trade, each of them

Answer 1

Consumes at a point on his or her production possibilities frontier

Question 2

After Frank and Ruby engage in trade, each of them

Answer 2

Consumes at a point outside his or her production possibilities frontier

Question 3

In an hour, Mateo can wash 2 cars and mow 1 lawn, and Sophia can was 3 cars and mow 1 lawn. Who has the absolute advantage in car washing, and who has the absolute advantage in lawn mowing?

Answer 3

Sophia in washing, neither in mowing

Question 4

Between Mateo and Sophia, who has the comparative advantage in car washing, and who has the comparative advantage in lawn mowing?

Answer 4

Sophia in washing, Mateo in mowing

Question 5

When Mateo and Sophia produce efficiently and make mutually beneficial trade based on comparative advantage.

Answer 5

Mateo mows more and Sophia washes more

Question 6

A nation will typically import those goods in which

Answer 6

Other nations have a comparative advantage

Question 7

Suppose that in the United States, producing an aircraft takes 10,000 hours of labor and producing a shirt takes 3 hours of labor. In China, producing an aircraft takes 40,000 hours of labor and producing a shirt takes 4 hours of labor. What will these nations trade?

Answer 7

China will export shirts, and the United States will export aircraft

Question 8

Kayla can cook dinner in 30 mins and wash the laundry in 20 mins. Her roommate takes twice as long to do each task. How should the roommates allocate the work?

Answer 8

There are no gains from trade in this situation