Question

A. Exhibit 34-9

Country X		Country Y
Good A	Good B	Good A	Good B
300	0	60	0
200	10	40	30
100	20	20	60
0	30	0	90

Refer to Exhibit 34-9. In the no specialization-no trade case, suppose country X produces and consumes 100 units of good A and 20 units of good B. Country Y produces and consumes 20 units of good A and 60 units of good B. If the two countries specialize and trade, and the actual amounts traded are 125 units of good A for 25 units of good B, how many more units of good A will country X consume by specializing and trading?

75

25

15

105

50

B.

Dumping occurs when a firm sells goods abroad at a price below their cost and below the price charged in their domestic market.

True

False

C.

As discussed in the textbook, various studies in the past have shown that there are ________________ degrees of separation between any two people in the world. Social media would be expected to _______________ the number of degrees of separation, making the world ________________.

5 to 7; reduce; "smaller"

8 to 10; reduce; "bigger"

5 to 7; raise; "bigger"

8 to 10; raise; "bigger"

Answer 1

A. 75
Opportunity cost of good A for country X = Total B given up/Total A gained = (10-0)/(300-200) = 10/100 = 0.1
Opportunity cost of good A for country Y = Total B given up/Total A gained = (30-0)/(60-40) = 30/20 = 1.5
So, Country A has comparative advantage in production of good X. Thus it will produce only X = 300. Amount traded = 125. So, amount left = 300-125 = 175. Extra X consumed by A = 175 -100 = 75

B. True
Dumping means selling good in another country at a lower price than in the domestic market.

C. 5 to 7; reduce; "smaller"
(According to studies, there are 6 degrees of separation mainly. However, social media will reduce this gap and make the world smaller.)