econ 212 interpendence/comparative advantage

What does interdependence mean in economics?

People rely on others worldwide to provide goods and services.

What key idea explains why trade is beneficial?

Trade can make everyone better off.

Why are countries interdependent?

Because each country specializes in certain goods and relies on others for the rest.

How many labor hours per month does the U.S. have for production?

50,000 labor hours.

How many labor hours does it take the U.S. to produce 1 airplane?

500 labor hours.

How many labor hours does it take the U.S. to produce 1 ton of soybeans?

10 labor hours.

How many labor hours per month does Japan have for production?

30,000 labor hours.

How many labor hours does Japan need to produce 1 airplane?

625 labor hours.

How many labor hours does Japan need to produce 1 ton of soybeans?

25 labor hours.

What are imports?

Goods produced abroad and sold domestically.

What are exports?

Goods produced domestically and sold abroad.

Without trade, what does the U.S. consume?

50 airplanes and 2,500 tons of soybeans.

Without trade, what does Japan consume?

24 airplanes and 600 tons of soybeans.

What is absolute advantage?

The ability to produce a good using fewer inputs than another producer.

When do two countries gain from trade?

When each specializes in producing the good it can produce at the lowest cost.

What is the opportunity cost of 1 airplane?

The amount of soybeans that could be produced using the labor needed for 1 airplane.

What does absolute advantage measure?

Inputs required to produce a good.

What is comparative advantage?

Producing a good at a lower opportunity cost than another producer.

What is the principle of comparative advantage?

Each good should be produced by whoever has the lowest opportunity cost of producing it.