1、Chapter3InterdependenceandtheGainsfromTradeMultipleChoicePeoplewhoprovideyouwithgoodsandservicesareactingoutofgenerosity.dosobecausetheyhavenootherchoice.dosobecausetheygetsomethinginreturn.arerequiredtodosobygovernment.ANS:CPTS:1DIF:1REF:3-0TOP:TradeMSC:InterpretiveWhenaneconomistpointsoutthatyouan

2、dmillionsofotherpeopleareinterdependent,heorsheisreferringtothefactthatweallrelyupongovernmenttoprovideuswiththebasicnecessitiesoflife.relyupononeanotherforthegoodsandservicesweallconsume.havesimilartastesandabilities.areconcernedaboutoneanotherswell-being.ANS:BPTS:1DIF:1REF:3-0TOP:TradeMSC:Interpre

3、tivePeoplegenerallychoosetodependuponothersforgoodsandservices.Economistsviewthisinterdependenceasagoodthing,sinceitfostersfriendshipsandbondsthatotherwisewouldneverdevelop.agoodthing,sinceitallowspeopletoconsumemoregoodsandservicesthantheywouldotherwisebeabletoconsume.abadthing,sinceself-sufficienc

4、ymaybecomenecessaryinthefuture.abadthing,sinceinterdependencereducespeoplesself-esteemandcausesvarioussocialproblems.ANS:BPTS:1DIF:1REF:3-1Regangrowsflowersandmakesceramicvases.Jaysonalsogrowsflowersandmakesvases,butReganisbetteratproducingboth.Inthiscase,tradecouldbenefitbothJaysonandRegan.benefitJ

5、ayson,butnotRegan.benefitRegan,butnotJayson.benefitneitherJaysonnorRegan.ANS:APTS:1DIF:2REF:3-1TOP:TradeMSC:InterpretiveBenbakesbreadandShawnaknitssweaters.Benlikestoeatbreadandwearsweaters,andthesameistrueforShawna.InwhichofthefollowingcasesisitimpossibleforbothBenandShawnatobenefitfromtradeBencann

6、otknitsweatersandShawnacannotbakebread.BenisbetterthanShawnaatbakingbreadandShawnaisbetterthanBenatknittingsweaters.BenisbetterthanShawnaatbakingbreadandatknittingsweaters.Noneoftheaboveiscorrect.ANS:DPTS:1DIF:2REF:3-1TOP:TradeMSC:ApplicativeShannonbakescookiesandJustingrowsvegetables.Inwhichofthefo

7、llowingcasesisitimpossibleforbothShannonandJustintobenefitfromtradeShannondoesnotlikevegetablesandJustindoesnotlikecookies.ShannonisbetterthanJustinatbakingcookiesandJustinisbetterthanShannonatgrowingvegetables.JustinisbetterthanShannonatbakingcookiesandatgrowingvegetables.Alloftheabovearecorrect.AN

8、S:APTS:1DIF:2REF:3-1Considerashoemakerandavegetablefarmer.Potentially,tradecouldbenefitbothindividualsiftheshoemakercanproduceonlyshoesandthevegetablefarmercanproduceonlyvegetables.theshoemakeriscapableofgrowingvegetables,butheisnotverygoodatit.thevegetablefarmerisbetteratgrowingvegetablesandbettera

9、tmakingshoesthantheshoemaker.Alloftheabovearecorrect.ANS:DPTS:1DIF:2REF:3-1TOP:TradeMSC:InterpretiveWithouttrade,acountryisbetteroffbecauseitwillhavetolearntobeself-sufficientwithouttrade.acountrysproductionpossibilitiesfrontierisalsoitsconsumptionpossibilitiesfrontier.acountrycanstillbenefitfromint

10、erdependenceismoreextensivethanitwouldbewithtrade.ANS:BPTS:1DIF:2REF:3-1TOP:TradeMSC:InterpretiveAcountrysconsumptionpossibilitiesfrontiercanbeoutsideitsproductionpossibilitiesfrontierifthecountrystechnologyissuperiortothetechnologiesofothercountries.thecitizensofthecount

11、ryhaveagreaterdesiretoconsumegoodsandservicesthandothecitizensofothercountries.thecountryengagesintrade.Alloftheabovearecorrect.ANS:CPTS:1DIF:2REF:3-1TOP: Trade | Production possibilities frontierMSC:InterpretiveAproductionpossibilitiesfrontierwillbeastraightlineifincreasingtheproductionofonegoodbyx

12、unitsentailsnoopportunitycostintermsoftheothergood.increasingtheproductionofonegoodbyxunitsentailsaconstantopportunitycostintermsoftheothergood.theeconomyisproducingefficiently.theeconomyisengagedintradewithatleastoneothereconomy.ANS:BPTS:1DIF:3REF:3-1TOP:ProductionpossibilitiesfrontierMSC:Applicati

13、veThedifferencebetweenproductionpossibilitiesfrontiersthatarebowedoutandthosethatarestraightlinesisthatbowed-outproductionpossibilitiesfrontiersapplytoeconomiesthatfacetradeoffs,whereasstraight-lineproductionpossibilitiesfrontiersapplytoeconomiesthatdonotfacetradeoffs.bowed-outproductionpossibilitie

14、sfrontiersapplytoeconomiesinwhichresourcesarenotspecialized,whereasstraight-lineproductionpossibilitiesfrontiersapplytoeconomiesinwhichresourcesarespecialized.bowed-outproductionpossibilitiesfrontiersillustrateincreasingopportunitycost,whereasstraight-lineproductionpossibilitiesfrontiersillustrateco

15、nstantopportunitycost.straight-lineproductionpossibilitiesfrontiersillustratereal-worldconditions,whereasbowed-outproductionpossibilitiesfrontiersillustratemoresimplisticassumptions.ANS:CPTS:1DIF:3REF:3-1TOP:Productionpossibilitiesfrontier|OpportunitycostMSC:ApplicativeWhichofthefollowingstatementsi

16、snotcorrectTradeallowsforspecialization.Tradehasthepotentialtobenefitallnations.Tradeallowsnationstoconsumeoutsideoftheirproductionpossibilitiescurves.Absoluteadvantageisthedrivingforceofspecialization.IflaborinMexicoislessproductivethanlaborintheUnitedStatesinallareasofproduction,a.neithernationcan

17、benefitfromtrade.MexicocanbenefitfromtradebuttheUnitedStatescannot.theUnitedStateswillhaveacomparativeadvantagerelativetoMexicointheproductionofallgoods.bothMexicoandtheUnitedStatesstillcanbenefitfromtrade.ANS:DPTS:1DIF:2REF:3-2TOP:Comparativeadvantage|TradeMSC:InterpretiveTheproductionpossibilities

18、frontierisadownward-slopingstraightlinewhenitispossibletoswitchbetweenonegoodandtheothergoodataconstantrate.thereisnotradeoffinvolvedinswitchingbetweenonegoodandtheothergood.thesameamountoftimeisrequiredtoproduceaunitofonegoodasisrequiredtoproduceaunitoftheothergood.thepersonforwhomthefrontierisdraw

19、nwishestoconsumeequalamountsofthetwogoods.ANS:APTS:1DIF:2REF:3-1TOP:ProductionpossibilitiesfrontierMSC:InterpretiveTable3-1LaborHoursNeededtoMake1Poundof:Poundsproducedin40hours:MeatPotatoesMeatPotatoesFarmer82520Rancher45108RefertoTable3-1.Theopportunitycostof1poundofmeatforthefarmeris1/4houroflabo

20、r.4hoursoflabor.4poundsofpotatoes.1/4poundofpotatoes.ANS:CPTS:1DIF:2REF:3-216. Refer to Table 3-1.Theopportunitycostof1poundofmeatfortherancheris4hoursoflabor.5hoursoflabor.4/5poundsofpotatoes.5/4poundsofpotatoes.REF: 3-2ANS:CPTS:1DIF:2TOP:OpportunitycostMSC:Applicative17.RefertoTable3-1.Theopportun

21、itycostof1poundofpotatoesforthefarmerisa.8hoursoflabor.2hoursoflabor.4poundsofmeat.1/4poundofmeat.ANS:DPTS:1DIF:2TOP:OpportunitycostMSC:REF:3-2Applicative18.RefertoTable3-1.Theopportunitycostof1poundofpotatoesfortherancherisa.5hoursoflabor.4hoursoflabor.5/4poundsofmeat.4/5poundofmeat.ANS:CPTS:1DIF:2

22、TOP:OpportunitycostMSC:REF:3-2ApplicativeRefertoTable3-1.Thefarmerhasanabsoluteadvantageinmeat,andtherancherhasanabsoluteadvantageinpotatoes.potatoes,andtherancherhasanabsoluteadvantageinmeat.meat,andtherancherhasanabsoluteadvantageinmeat.d.neithergood,andtherancherhasanabsoluteadvantageinbothgoods.

23、ANS:BPTS:1DIF:2REF:3-2RefertoTable3-1.Therancherhasanabsoluteadvantageinbothgoods,andthefarmerhasacomparativeadvantageinmeat.bothgoods,andthefarmerhasacomparativeadvantageinpotatoes.meat,andthefarmerhasacomparativeadvantageinpotatoes.meat,andthefarmerhasacomparativeadvantageinneithergood.ANS:CPTS:1D

24、IF:3REF:3-2TOP:Absoluteadvantage|ComparativeadvantageMSC:ApplicativeRefertoTable3-1.Thefarmerhasanabsoluteadvantageinpotatoes,andtherancherhasacomparativeadvantageinmeat.meat,andtherancherhasacomparativeadvantageinpotatoes.neithergood,andtherancherhasacomparativeadvantageinpotatoes.neithergood,andth

25、erancherhasacomparativeadvantageinmeat.ANS:APTS:1DIF:3REF:3-2TOP:Absoluteadvantage|ComparativeadvantageMSC:ApplicativeRefertoTable3-1.Therancherhasacomparativeadvantageinneithergood,andthefarmerhasacomparativeadvantageinbothgoods.bothgoods,andthefarmerhasacomparativeadvantageinneithergood.potatoes,a

26、ndthefarmerhasacomparativeadvantageinmeat.meat,andthefarmerhasacomparativeadvantageinpotatoes.ANS:DPTS:1DIF:2REF:3-2TOP:ComparativeadvantageMSC:ApplicativeRefertoTable3-1.Thefarmerandtherancherbothcouldbenefitifthefarmerweretospecializeinmeatandtherancherweretospecializeinpotatoes.potatoesandtheranc

27、herweretospecializeinmeat.neithergoodandtherancherweretospecializeinbothgoods.noneoftheabove;theycannotbothbenefitbyspecializationandtrade.24.RefertoFigure3-1.IfPauldivideshistimeequallybetweencornandwheat,hewillbeabletoproduce2bushelsofwheatand2bushelsofcorn.3bushelsofwheatand3bushelsofcorn.4bushel

28、sofwheatand5bushelsofcorn.4bushelsofwheatand6bushelsofcorn.ANS:CPTS:1DIF:2REF:3-2TOP:ProductionpossibilitiesfrontierMSC:Applicative25.RefertoFigure3-1.Theopportunitycostof1bushelofwheatforCliffis1/3bushelofcorn.2/3bushelofcorn.1bushelofcorn.3/2bushelsofcorn.ANS:BPTS:1DIF:2REF:3-2TOP:OpportunitycostM

29、SC:Applicative26. Refer to Figure 3-1.Theopportunitycostof2bushelsofcornforCliffis2bushelsofwheat.3bushelsofwheat.6bushelsofwheat.12bushelsofwheat.ANS: BPTS: 1DIF: 2REF: 3-2TOP: Opportunity costMSC:Applicative27.RefertoFigure3-1.Theopportunitycostof1bushelofcornisthus, Paul has the comparative4/5bus

30、helofwheatforPauland3/2bushelsofwheatforCliff;advantageingrowingcorn.4/5bushelofwheatforPauland3/2bushelsofwheatforCliff;thus,Cliffhasthecomparativeadvantageingrowingcorn.5/4bushelsofwheatforPauland2/3bushelofwheatforCliff;thus,Paulhasthecomparativeadvantageingrowingcorn.5/4bushelsofwheatforPauland2

31、/3bushelofwheatforCliff;thus,Cliffhasthecomparativeadvantageingrowingcorn.ANS:APTS:1DIF:3REF:3-2MSC:ApplicativeTOP:Opportunitycost|Comparativeadvantage28. Refer to Figure 3-1. Assume both Paul and Cliff dividetheir time equallybetween the productionofcornandwheat,andtheydonottrade.Iftheyaretheonlypr

32、oducersofwheatandcorn,thentotalproductionofwheatandcornis8bushelsofwheatand7bushelsofcorn.7bushelsofwheatand6bushelsofcorn.6bushelsofwheatand8bushelsofcorn.7bushelsofwheatand7bushelsofcorn.ANS:DPTS:1DIF:2REF:3-2RefertoFigure3-1.AssumeCliffandPaulwerebothproducingwheatandcorn,andeachpersonwasdividing

33、histimeequallybetweenthetwo.Theneachdecidestospecializeintheproductinwhichhehasacomparativeadvantage.Asaresultofthischange,totalproductionofcornwouldincreaseby1bushel.increaseby3bushels.increaseby5bushels.decreaseby2bushels.ANS:BPTS:1DIF:3REF:3-2TOP:ComparativeadvantageMSC:ApplicativeRefertoFigure3-

34、1.AssumeCliffandPaulwerebothproducingwheatandcorn,andeachpersonwasdividinghistimeequallybetweenthetwo.Theneachdecidestospecializeintheproductinwhichhehasacomparativeadvantage.Furthermore,theyagreetotrade3bushelsofwheatfor3bushelsofcorn.Asaresultofthesenewarrangements,Cliffisabletoconsume4bushelsofwh

35、eatand3bushelsofcorn,andthispointliesonCliffsproductionpossibilitiesfrontier.3bushelsofwheatand3bushelsofcorn,andthispointliesoutsideofCliffsproductionpossibilitiesfrontier.3bushelsofwheatand2bushelsofcorn,andthispointliesonCliffsproductionpossibilitiesfrontier.4bushelsofwheatand3bushelsofcorn,andth

36、ispointliesoutsideofCliffsproductionpossibilitiesfrontier.ANS:BPTS:1DIF:3REF:3-2TOP:Comparativeadvantage|Specialization|TradeMSC:Analytical31. Refer to Figure 3-1.WhichofthefollowingstatementsiscorrectPaulhasanabsoluteadvantageinbothwheatandcorn.PaulhasanabsoluteadvantageinwheatandCliffhasanabsolute

37、advantageincorn.CliffhasanabsoluteadvantageinwheatandPaulhasanabsoluteadvantageincorn.Cliffhasanabsoluteadvantageinbothwheatandcorn.ANS:APTS:1DIF:2REF:3-2TOP:AbsoluteadvantageMSC:ApplicativeRefertoFigure3-1.WhichofthefollowingstatementsiscorrectPaulhasacomparativeadvantageinbothwheatandcorn.Paulhasa

38、comparativeadvantageinwheatandCliffhasacomparativeadvantageincorn.CliffhasacomparativeadvantageinwheatandPaulhasacomparativeadvantageincorn.Cliffhasacomparativeadvantageinbothwheatandcorn.ANS:CPTS:1DIF:2REF:3-2TOP:ComparativeadvantageMSC:ApplicativeRefertoFigure3-1.SupposePaulmustwork2hourstoproduce

39、eachbushelofcorn.ThenPaulsproductionpossibilitiesfrontierisbasedonhowmanyhoursofworka.hours5hours10hours20hoursMSC: ApplicativeANS:DPTS:1DIF:2REF:3-2TOP:Productionpossibilitiesfrontiera. must work hours to produceeach bushel of wheat,and his opportunitycostofa bushel of cornisbushelsofwheat.b. must

40、work hours to produceeach bushel of wheat,and his opportunitycostofa bushel of cornisbushelsofwheat.c. must work hours to produceeach bushel of wheat,and his opportunitycostofa bushel of cornisbushelsofwheat.d. must work hours to produceeach bushel of wheat,and his opportunitycostofa bushel of corni

41、sbushelsofwheat.ANS: CPTS: 1DIF: 3REF: 3-2TOP: Production possibilities frontier | Opportunity costMSC: Analytical35. Refer to Figure 3-1. Suppose Cliff must work 5 hoursto produce each bushel ofcorn. Then Cliff sproductionpossibilitiesfrontierisbasedonhowmanyhoursofworka.hoursb.hours15hours20hoursA

42、NS: DPTS: 1DIF: 2REF: 3-2MSC: ApplicativeTOP:ProductionpossibilitiesfrontierRefertoFigure3-1.SupposeCliffmustwork5hourstoproduceeachbushelofcorn.ThenCliffmustwork31/3hourstoproduceeachbushelofwheat,andhisopportunitycostofabushelofcornis2/3bushelofwheat.mustwork31/3hourstoproduceeachbushelofwheat,and

43、hisopportunitycostofabushelofcornisbushelsofwheat.mustworktoproduceeachbushelofwheat,andhisopportunitycostofabushelofcornisapproximately2/3bushelofwheat.mustworkhourstoproduceeachbushelofwheat,andhisopportunitycostofabushelofcornisbushelsofwheat.ANS:BPTS:1DIF:3REF:3-2a. 1/14 pound of cones.1/2 pound

44、 of cones.2 pounds of cones.4 pound of cones.ANS: DPTS: 1DIF: 2REF: 3-2TOP: Opportunity costMSC:ApplicativeRefertoFigure3-2.ForJerry,theopportunitycostof1poundoficecreamis1/3poundofcones.2/3poundofcones.3/2poundsofcones.2poundsofcones.ANS:CPTS:1DIF:2REF:3-2TOP:OpportunitycostMSC:ApplicativeRefertoFi

45、gure3-2.ForBen,theopportunitycostof1poundofconesis1/4poundoficecream.1/2poundoficecream.2poundsoficecream.4poundsoficecream.ANS:APTS:1DIF:2REF:3-21/3poundoficecream.2/3poundoficecream.3/2poundsoficecream.2poundsoficecream.ANS:BPTS:1DIF:2REF:3-2TOP:OpportunitycostMSC:ApplicativeRefertoFigure3-2.Benha

46、sacomparativeadvantageinconesandJerryhasacomparativeadvantageinicecream.icecreamandJerryhasacomparativeadvantageincones.neithergoodandJerryhasacomparativeadvantageinbothgoods.bothgoodsandJerryhasacomparativeadvantageinneithergood.ANS:APTS:1DIF:2REF:3-2TOP:ComparativeadvantageMSC:ApplicativeRefertoFi

47、gure3-2.BenhasanabsoluteadvantageinicecreamandJerryhasanabsoluteadvantageincones.conesandJerryhasanabsoluteadvantageinicecream.neithergoodandJerryhasanabsoluteadvantageinbothgoods.bothgoodsandJerryhasanabsoluteadvantageinneithergood.ANS:BPTS:1DIF:2REF:3-2TOP:AbsoluteadvantageMSC:ApplicativeRefertoFi

48、gure3-2.Benhasanabsoluteadvantageinneithergoodandhehasacomparativeadvantageinneithergood.neithergoodandhehasacomparativeadvantageincones.conesandhehasacomparativeadvantageincones.icecreamandhehasacomparativeadvantageinicecream.ANS:CPTS:1DIF:3REF:3-2bothgoodsandBenhasacomparativeadvantageinicecream.n

49、eithergoodandBenhasacomparativeadvantageincones.icecreamandBenhasacomparativeadvantageinicecream.icecreamandBenhasacomparativeadvantageincones.ANS:DPTS:1DIF:3REF:3-2TOP:Absoluteadvantage|ComparativeadvantageMSC:ApplicativeRefertoFigure3-2.SupposeBenandJerryhavebothdecidedtoproduceatpointAontheirresp

50、ectiveproductionpossibilitiesfrontiers.WeknowthatneitherBenswell-beingnorJerryswell-beingcouldbeimprovedasaresultoftradebetweenthetwo.tradebetweenthetwocouldbenefitBenbutnotJerry.tradebetweenthetwocouldbenefitJerrybutnotBen.BenandJerryarebothallocating1/2oftheirtimetotheproductionofeachgood.ANS:DPTS

51、:1DIF:2REF:3-2TOP:ProductionpossibilitiesfrontierMSC:ApplicativeRefertoFigure3-2.Originally,BenwasproducingathispointAandJerrywasproducingathispointA.Then,eachpersondecidedtospecializeintheproductinwhichhehasacomparativeadvantage.Furthermore,theyagreedtotrade4poundsofconesfor2poundsoficecream.Asares

52、ultofthesenewarrangements,thegainsfromtraderelativetotheoriginalsituationareasfollows:1additionalpoundofconesforBenand1additionalpoundoficecreamforJerry.1additionalpoundoficecreamforBenand1additionalpoundofconesforJerry.2additionalpoundsoficecreamforBenand2additionalpoundsofconesforJerry.2additional

53、poundsoficecreamforBenand1additionalpoundofconesforJerry.MSC: AnalyticalANS:BPTS:1DIF:3REF:3-2TOP:Productionpossibilitiesfrontier|Specialization|Tradefrontier is based on 4 hours of work.RefertoFigure3-2.SupposeBensproductionpossibilitiesHowmuchtimedoesBenrequiretoproduce1poundoficecreama.1/2hourb.1

54、hourc.2hoursd.Theanswercannotbedeterminedfromthegiveninformation.ANS:CPTS:1DIF:2REF:3-2TOP:ProductionpossibilitiesfrontierMSC:ApplicativeRefertoFigure3-2.SupposeJerrysproductionpossibilitiesfrontierisbasedon4hoursofwork.Jerryrequires1/4hourtoproduce1poundoficecreamand3/8hourtoproduce1poundofcones.1/

55、2hourtoproduce1poundoficecreamand3/4hourtoproduce1poundofcones.1hourtoproduce1poundoficecreamand2/3hourtoproduce1poundofcones.1hourtoproduce1poundoficecreamand3/2hourstoproduce1poundofcones.ANS:CPTS:1DIF:2REF:3-2TOP:ProductionpossibilitiesfrontierMSC:ApplicativeRefertoFigure3-2.SupposeBensproduction

56、possibilitiesfrontierisbasedon4hoursofworkandthesametrueisforJerrys.ThenBenrequires2hourstoproduceapoundoficecreamandJerryrequires40minutestoproduceapoundofcones.ifBenworked1hourproducingicecreamand3hoursproducingcones,andifJerryworked3hoursproducingicecreamand1hourproducingcones,totaloutputwouldbep

57、oundsoficecreamandpoundsofcones.ifeachpersonworked4hours,specializingintheactivityinwhichhehasacomparativeadvantage,totaloutputwouldbe4poundsoficecreamand8poundsofcones.Alloftheabovearecorrect.ANS:DPTS:1DIF:3REF:3-2TOP:Productionpossibilitiesfrontier|SpecializationMSC:ApplicativeForthefollowingquest

58、ion(s),usetheaccompanyingtable.LaborHoursneededtomakeoneAmountproducedin90hours:QuiltDressQuiltsDressesHelen50109Carolyn904512Table3-250.RefertoTable3-2.ForHelen,theopportunitycostof1quiltisa.dresses.b.2dresses.c.dresses.d.5dresses.ANS:DPTS:1TOP:OpportunitycostDIF:2REF:3-2MSC:Applicative51.RefertoTa

59、ble3-2dresses.1dress.ForCarolyn,theopportunitycostof1quiltis2dresses.3dresses.ANS:CPTS:1TOP:OpportunitycostDIF:2REF:3-2MSC:ApplicativeRefertoTable3-2.ForHelen,theopportunitycostof1dressis1/5quilt.1/4quilt.2quilts.d.5quilts.ANS:APTS:1DIF:2REF:3-25quilts.4quilts.1/2quilt.1/10quilt.ANS:CPTS:1DIF:2REF:3

60、-2TOP:OpportunitycostMSC:ApplicativeRefertoTable3-2.HelenhasacomparativeadvantageinquiltsandCarolynhasanabsoluteadvantageinneithergood.dressesandCarolynhasanabsoluteadvantageinquilts.quiltsandCarolynhasanabsoluteadvantageindresses.dressesandCarolynhasanabsoluteadvantageinneithergood.ANS:DPTS:1DIF:3R