Power of trade
Chapter 2 The Power of Trade and Comparative
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End-of-Chapter Questions
November 25, 2012
Facts and Tools
1. Use the idea of the division of knowledge to answer the following questions.
(a). Which country has more knowledge: Utopia, where in the words of Karl Marx, each person knows just enough about hunting, shing, and cattle raising to hunt in the morning, sh in the afternoon, [and] rear cattle in the evening, or Drudgia, where one-third of the population learns only about hunting, onethird only about shing, and one-third only about cattle raising?
GHOST
ANSWER:
There is more knowledge in Drudgia.
(b). Which planet has more knowledge: Xeroxia, each of whose one million inhabitants knows the same list of one million facts, or Dierentia, whose one million inhabitants each know a dierent set of one million facts? How many facts are known in Xeroxia? How many facts are known in Dierentia?
GHOST
ANSWER:
In Xeroxia, people know one million facts. In Dierentia, people know one trillion facts, a million times more.
We would expect Dierentia to have a higher standard of living.
2. In the Wealth of Nations, Adam Smith said that one reason specialization makes someone more productive is because a man commonly saunters a little in turning his hand from one sort of employment to another.
How can you use this observation to improve your pattern of studying for your four or ve college courses this semester?
GHOST
ANSWER:
You should set aside long blocks of time (perhaps 1 to 2 hours) for each individual course, rather than switching every 15 minutes from reading biology to reading economics and back again. Every time you switch jobs, you waste some time getting used to the new task.
3. Opportunity cost is one of the tougher ideas in economics. Let's make it easier by starting with some simple examples.
In the examples below, nd the opportunity cost: Your answer should be a rate, as
in 1.5 widgets per
Advantage
End-of-Chapter Questions
November 25, 2012
Facts and Tools
1. Use the idea of the division of knowledge to answer the following questions.
(a). Which country has more knowledge: Utopia, where in the words of Karl Marx, each person knows just enough about hunting, shing, and cattle raising to hunt in the morning, sh in the afternoon, [and] rear cattle in the evening, or Drudgia, where one-third of the population learns only about hunting, onethird only about shing, and one-third only about cattle raising?
GHOST
ANSWER:
There is more knowledge in Drudgia.
(b). Which planet has more knowledge: Xeroxia, each of whose one million inhabitants knows the same list of one million facts, or Dierentia, whose one million inhabitants each know a dierent set of one million facts? How many facts are known in Xeroxia? How many facts are known in Dierentia?
GHOST
ANSWER:
In Xeroxia, people know one million facts. In Dierentia, people know one trillion facts, a million times more.
We would expect Dierentia to have a higher standard of living.
2. In the Wealth of Nations, Adam Smith said that one reason specialization makes someone more productive is because a man commonly saunters a little in turning his hand from one sort of employment to another.
How can you use this observation to improve your pattern of studying for your four or ve college courses this semester?
GHOST
ANSWER:
You should set aside long blocks of time (perhaps 1 to 2 hours) for each individual course, rather than switching every 15 minutes from reading biology to reading economics and back again. Every time you switch jobs, you waste some time getting used to the new task.
3. Opportunity cost is one of the tougher ideas in economics. Let's make it easier by starting with some simple examples.
In the examples below, nd the opportunity cost: Your answer should be a rate, as
in 1.5 widgets per