Table 7-6

Output per hourProduction and Production

of work

Consumption without Trade

with Trade

	Swords	Belts	Swords	Belts	Swords	Belts
Estonia	5	3	100	60	200	0
Morocco	2	2	40	40	0	80

Estonia and Morocco can produce both swords and belts. Each country has a total of 40 available labor hours for the production of swords and belts. Table 7-6 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade. 1. Refer to Table 7-6.Which country has a comparative advantage in producing swords?

a. Estonia

b. Morocco

c. both countries

d. neither country

2. Refer to Table 7-6.With trade, what is the total gain in sword production?

a. 40

b. 60

c. 100

d. 200

3. Refer to Table 7-6.All of the following are terms of trade that could possibly benefit both countriesexcept

a. 1 belt : 2.25 swords.

b. 1 belt : 1.33 swords.

c. 1 belt : 1.55 swords.

d. 1 belt : 1.25 swords.

4.Refer to Table 7-6.If the actual terms of trade are 1 belt for 1.5 swords and 50 belts are traded, how many swords will Estonia consume?

a. 75

b. 100

c. 125

d. 200

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Figure 7-2

Price (dollars per pound) U.S. supply $3.00 2.50 Pw + Tariff 1.75 World price, Pw U.S. demand 0.50 O 15 24 30 36 45 Quantity of coffee (millions of pounds)