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Exam 19: Interdependence and the Gains From Trade

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Question 31

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Table 1 shows the units of output a worker can produce per month in South Africa and Namibia. $\begin{array} { | l | c | c | } \hline & \text { Fond } & \text { Electranics } \\\hline \text { South Africa } & 20 & 5 \\\hline \text { Narmibia } & 8 & 2 \\\hline\end{array}$ -Refer to Table 1. Which of the following statements about comparative advantage is true?

A) South Africa has a comparative advantage in the production of both food and electronics.
B) Namibia has a comparative advantage in the production of both food and electronics.
C) South Africa has a comparative advantage in the production of food while Namibia has a comparative advantage in the production of electronics.
D) Namibia has a comparative advantage in the production of food while South Africa has a comparative advantage in the production of electronics.
E) Neither country has a comparative advantage.

F) A) and E)
G) None of the above

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Question 32

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Opportunity costs change as an economy moves along its production possibilities frontier because

A) resources are not completely adaptable to alternative uses.
B) factors of production are limited and human wants are unlimited.
C) efficiencies are generated by large-scale production.
D) economic efficiency is only possible in the short run.

E) B) and D)
F) A) and D)

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Question 33

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All points on a production possibilities frontier show the

Comparative advantage, not absolute advantage, determines the decision to specialise in production.

Which of the following statements is true?

Draw a production possibilities frontier showing increasing opportunity cost of hammers in terms of horseshoes. a. On the graph, identify the area of feasible outcomes and the area of infeasible outcomes. b. On the graph, label a point that is efficient and a point that is inefficient. c. On the graph, illustrate the effect of the discovery of a new vein of iron ore, a resource needed to make both horseshoes and hammers, on this economy. d. On a second graph, illustrate the effect of a new computerised assembly line in the production of hammers on this economy.

Tariffs and quotas cause deadweight losses because they raise the price of the imported good and cause over-production and under-consumption of the good in the importing country.

Busisani is a tax accountant. He receives R100 per hour doing tax returns. He can type 10 000 characters per hour into spreadsheets. He can hire an assistant who types 2 500 characters per hour into spreadsheets. Which of the following statements is true?

Exhibit 2 -Refer to Exhibit 2. If free trade is allowed, consumer surplus is the

Explain the difference between absolute advantage and comparative advantage. Which is more important in determining trade patterns, absolute advantage or comparative advantage? Why?

Exhibit 3 -Refer to Exhibit 3. If free trade is allowed, consumer surplus is the

If an economy is operating on its production possibilities frontier, it must be using its resources efficiently.

When a country allows trade and exports a good,

Opponents of free trade often argue that free trade destroys domestic jobs.

Use the graph to answer the following questions about music album downloads. $\text { R22 }$ a. What is the equilibrium price of music album downloads before trade? b. What is the equilibrium quantity of music album downloads before trade? c. What is the price of music album downloads after trade is allowed? d. What is the quantity of music album downloads exported after trade is allowed? e. What is the amount of consumer surplus before trade? f. What is the amount of consumer surplus after trade? g. What is the amount of producer surplus before trade? h. What is the amount of producer surplus after trade? i. What is the amount of total surplus before trade? j. What is the amount of total surplus after trade? k. What is the change in total surplus because of trade?

Table 1 shows the units of output a worker can produce per month in South Africa and Namibia. $\begin{array} { | l | c | c | } \hline & \text { Fond } & \text { Electranics } \\\hline \text { South Africa } & 20 & 5 \\\hline \text { Narmibia } & 8 & 2 \\\hline\end{array}$ -Refer to Table 1. The opportunity cost of 1 unit of food in South Africa is

Table 1 shows the units of output a worker can produce per month in South Africa and Namibia. $\begin{array} { | l | c | c | } \hline & \text { Fond } & \text { Electranics } \\\hline \text { South Africa } & 20 & 5 \\\hline \text { Narmibia } & 8 & 2 \\\hline\end{array}$ -Refer to Table 1. The opportunity cost of 1 unit of electronics in Namibia is

Economic growth is depicted by a