![]() For an exporter under free trade, consumer surplus will decrease compared to that in the absence of free trade. Carefully follow the instructions above, and only draw the required objects. Using the triangle drawing tool, shade the area that represents the consumer surplus with free trade. Using the double arrow line drawing tool, highlight the pounds of cheese exported from Wisconsin (a length, not an area). Suppose the world price is higher than the domestic equilibrium price, thereby generating exports rather than imports. The graph given below shows the supply and demand curves for pounds of cheese in Wisconsin. For Sweden, the overall _ because of trade are represented by the area(s) _. Therefore, Swedish consumers are better off because of trade. The consumer surplus is indicated by the areas L+M+N. ![]() The consumer surplus is indicated by the area L. Therefore, Swedish consumers are worse off because of trade. Therefore, Swedish producers are better off because of trade. The producer surplus is indicated by the areas O+M. The producer surplus is indicated by the area O. Therefore, Swedish producers are worse off because of trade. Which of the following statements are true. Consider the graph and the after trade situation in Sweden. This added demand does not change the world price because _. These movements lead to an excess demand of _ million units of Good Z in Sweden. At that price, Swedish consumers will demand to 7.40 million units of Good Z. Once Sweden is open to trade, Swedish producers will curb their production from 4.90 million units of Good Z to 2.60 million units and receive the world price of $40 per unit. With the assumption of a perfectly competitive market, the equilibrium price and quantity demanded of Good Z in Sweden is $57.50 and 4.90 million respectively. Suppose the world price of Good Z is $40. Joe has a comparative advantage in both goods. Samantha has a comparative advantage in both goods. Joe has a comparative advantage in pizza, and Samantha has a comparative advantage in cake. Neither has a comparative advantage in either good. Samantha has a comparative advantage in pizza, and Joe has a comparative advantage in cake. ![]() Who has the comparative advantage in the production of pizza and chocolate cake? A. Comparative advantage is the ability to produce a certain good at a lower opportunity cost than other producers. Samantha's opportunity cost of producing one chocolate cake is _ pizza(s). Samantha's opportunity cost of producing one pizza is _ chocolate cake(s). Using the information in the figure, calculate Samantha's opportunity cost of producing one pizza and her opportunity cost of producing one chocolate cake. The figure at right shows the PPC for Samantha. Joe's friend Samantha also makes pizzas and chocolate cakes. Joe's opportunity cost of producing one chocolate cake is _ pizza(s). Joe's opportunity cost of producing one pizza is _ chocolate cake(s). Remember that the opportunity cost is how much of one good must be given up to produce one more unit of the other good. Using the information in the figure, calculate Joe's opportunity cost of producing one pizza and his opportunity cost of producing one chocolate cake. He can spend his time making pizzas or chocolate cakes. The figure at right shows a production possibilities curve (PPC) for Joe. Label your curve 'Joint PPC.' 2.) Using the point drawing tool, locate the point where production will occur when Joe and Samantha specialize. 1.) Using the multipoint curve drawing tool, draw the PPC that results when Joe and Samantha work together. Using the figure on the right, draw the new PPC when Joe and Samantha specialize and indicate the point on the new PPC where production will occur. What will each of them specialize in making? Joe will specialize in making _, and Samantha will specialize in making _. Joe and Samantha decide to work together and specialize. (Round your responses to one decimal place.) Opportunity Cost of Pizza Joe=0.5 cakes Samantha=2.0 cakes Opportunity Cost of Cake Joe=2.0 pizzas Samantha=0.5 pizzas Who has the comparative advantage in the production of pizza and chocolate cake? A. Using the information in the figure, calculate the opportunity costs of making pizza and chocolate cake for both Joe and Samantha and then complete the table below. Each of them can spend time making pizzas or chocolate cakes. The figure at right shows production possibilities curves (PPC) for Joe and Samantha.
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