Question 1

If an economy is operating on its production possibilities frontier, it must produce less of one good if it produces more of another.

Accepted Answer

A) True 
 B)False  True

Question 2

Table 1 shows the units of output a worker can produce per month in Australia and Korea. ?
$\begin{array}{|l|l|l|}
\hline & \text { Food } & \text { Electronics } \
\hline \text { Australia } & 20 & 5 \
\hline \text { Korea } & 8 & 2 \
\hline
\end{array}$
Refer to table 1. Korea should

Accepted Answer

A)  specialize in electronics production, export electronics, and import food. 
B)  produce neither good because it has an absolute disadvantage in the production of both goods. 
C)  produce both goods because neither country has a comparative advantage. 
D)  specialize in food production, export food, and import electronics 
A)  specialize in electronics production, export electronics, and import food. 
B)  produce neither good because it has an absolute disadvantage in the production of both goods. 
C)  produce both goods because neither country has a comparative advantage. 
D)  specialize in food production, export food, and import electronics A

Question 3

Which of the following statements is true?

Accepted Answer

A)  A self-sufficient country can, at best, consume on its production possibilities frontier. 
B)  Only countries with an absolute advantage in the production of every good should strive to be self-sufficient. 
C)  A self-sufficient country consumes outside its production possibilities frontier. 
D)  Self-sufficiency is the road to prosperity for most countries. 
A)  A self-sufficient country can, at best, consume on its production possibilities frontier. 
B)  Only countries with an absolute advantage in the production of every good should strive to be self-sufficient. 
C)  A self-sufficient country consumes outside its production possibilities frontier. 
D)  Self-sufficiency is the road to prosperity for most countries. A

Question 4

Exhibit 2   ​ Refer to Exhibit 2. If free trade is allowed, consumer surplus is the

Accepted Answer

A)  Area A + B + C + D 
B)  Area A 
C)  Area A + B + D 
D)  Area A + B + C 
E)  Area A + B 
A)  Area A + B + C + D 
B)  Area A 
C)  Area A + B + D 
D)  Area A + B + C 
E)  Area A + B

Question 5

Exhibit 3   ​ Refer to Exhibit 3. Government revenue from the tariff is the

Accepted Answer

A)  Area D + F 
B)  Area G 
C)  Area E 
D)  Area D + E + F 
E)  Area C + D + E + F 
A)  Area D + F 
B)  Area G 
C)  Area E 
D)  Area D + E + F 
E)  Area C + D + E + F

Question 6

Table 1 shows the units of output a worker can produce per month in Australia and Korea. ?
$\begin{array}{|l|l|l|}
\hline & \text { Food } & \text { Electronics } \
\hline \text { Australia } & 20 & 5 \
\hline \text { Korea } & 8 & 2 \
\hline
\end{array}$
?
Refer to table 1. Prices of electronics can be stated in terms of units of food. What is the range of prices of electronics for which both countries could gain from trade? The price must be greater than:

Accepted Answer

A)  1/5 of a unit of food but less than 1/4 of a unit of food. 
B)  4 units of food but less than 5 units of food. 
C)  1/4 of a unit of food but less than 1/2 of a unit of food. 
D)  2 units of food but less than 4 units of food. 
A)  1/5 of a unit of food but less than 1/4 of a unit of food. 
B)  4 units of food but less than 5 units of food. 
C)  1/4 of a unit of food but less than 1/2 of a unit of food. 
D)  2 units of food but less than 4 units of food.

Question 7

Which of the following statements about import quotas is true?

Accepted Answer

A)  Voluntary quotas established by the exporting country reduce the importing country's deadweight loss from the trade restriction. 
B)  An import quota reduces the price to the domestic consumers. 
C)  An import quota increases the welfare of domestic producers. 
D)  Import quotas are preferred to tariffs because they raise more revenue for the imposing government. 
A)  Voluntary quotas established by the exporting country reduce the importing country's deadweight loss from the trade restriction. 
B)  An import quota reduces the price to the domestic consumers. 
C)  An import quota increases the welfare of domestic producers. 
D)  Import quotas are preferred to tariffs because they raise more revenue for the imposing government.

Question 8

Suppose a country's workers can produce 4 watches per hour or 12 rings per hour. If there is no trade, the opportunity cost of 1 watch is

Accepted Answer

A)  1/4 of a ring. 
B)  3 rings. 
C)  4 rings. 
D)  12 rings. 
E)  1/3 of a ring. 
A)  1/4 of a ring. 
B)  3 rings. 
C)  4 rings. 
D)  12 rings. 
E)  1/3 of a ring.

Question 9

Suppose the world price is below the before-trade domestic price for a good. If a country allows free trade in this good,

Accepted Answer

A)  both producers and consumers will gain. 
B)  both producers and consumers will lose. 
C)  producers will gain and consumers will lose. 
D)  consumers will gain and producers will lose. 
A)  both producers and consumers will gain. 
B)  both producers and consumers will lose. 
C)  producers will gain and consumers will lose. 
D)  consumers will gain and producers will lose.

Question 10

Comparative advantage, not absolute advantage, determines the decision to specialize in production.

Accepted Answer

A) True 
 B)False

Question 11

Exhibit 2   ​ Refer to Exhibit 2. If trade is not allowed, producer surplus is the

Accepted Answer

A)  Area A + B + C + D 
B)  Area A + B + C 
C)  Area B + C + D 
D)  Area C 
E)  Area B + C 
A)  Area A + B + C + D 
B)  Area A + B + C 
C)  Area B + C + D 
D)  Area C 
E)  Area B + C

Question 12

Draw a production possibilities frontier showing increasing opportunity cost of hammers in terms of horseshoes.
a. On the graph, identify the area of feasible outcomes and the area of infeasible outcomes.
b. On the graph, label a point that is efficient and a point that is inefficient.
c. On the graph, illustrate the effect of the discovery of a new vein of iron ore, a resource needed to make both horseshoes and hammers, on this economy.
d. On a second graph, illustrate the effect of a new computerized assembly line in the production of hammers on this economy.

Accepted Answer

The answer of Draw a production possibilities frontier showing increasing...

Question 13

Tariffs and quotas cause deadweight losses because they raise the price of the imported good and cause over-production and under-consumption of the good in the importing country.

Accepted Answer

A) True 
 B)False

Question 14

According to the principle of comparative advantage, countries

Accepted Answer

A)  should specialize in the production of goods that they enjoy consuming. 
B)  with a comparative advantage in the production of every good need not specialize. 
C)  should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners. 
D)  should specialize in the production of goods for which they use fewer resources in production than their trading partners. 
A)  should specialize in the production of goods that they enjoy consuming. 
B)  with a comparative advantage in the production of every good need not specialize. 
C)  should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners. 
D)  should specialize in the production of goods for which they use fewer resources in production than their trading partners.

Question 15

Explain the difference between absolute advantage and comparative advantage. Which is more important in determining trade patterns, absolute advantage or comparative advantage? Why?

Accepted Answer

Absolute advantage refers to productivit

Question 16

If a nation has an absolute advantage in the production of a good it:

Accepted Answer

A)  can benefit by restricting imports of that good. 
B)  will specialize in the production of that good and export it. 
C)  can produce that good using fewer resources than its trading partner. 
D)  can produce that good at a lower opportunity cost than its trading partner. 
A)  can benefit by restricting imports of that good. 
B)  will specialize in the production of that good and export it. 
C)  can produce that good using fewer resources than its trading partner. 
D)  can produce that good at a lower opportunity cost than its trading partner.

Question 17

Table 1 shows the units of output a worker can produce per month in Australia and Korea. ?
$\begin{array}{|l|l|l|}
\hline & \text { Food } & \text { Electronics } \
\hline \text { Australia } & 20 & 5 \
\hline \text { Korea } & 8 & 2 \
\hline
\end{array}$
?
Refer to table 1. Which of the following statements about comparative advantage is true?

Accepted Answer

A)  Australia has a comparative advantage in the production of both food and electronics. 
B)  Korea has a comparative advantage in the production of both food and electronics. 
C)  Australia has a comparative advantage in the production of food while Korea has a comparative advantage in the production of electronics. 
D)  Korea has a comparative advantage in the production of food while Australia has a comparative advantage in the production of electronics. 
E)  Neither country has a comparative advantage. 
A)  Australia has a comparative advantage in the production of both food and electronics. 
B)  Korea has a comparative advantage in the production of both food and electronics. 
C)  Australia has a comparative advantage in the production of food while Korea has a comparative advantage in the production of electronics. 
D)  Korea has a comparative advantage in the production of food while Australia has a comparative advantage in the production of electronics. 
E)  Neither country has a comparative advantage.

Question 18

If an economy is operating on its production possibilities frontier, it must be using its resources efficiently.

Accepted Answer

A) True 
 B)False

Question 19

Opportunity costs change as an economy moves along its production possibilities frontier because

Accepted Answer

A)  resources are not completely adaptable to alternative uses. 
B)  factors of production are limited and human wants are unlimited. 
C)  efficiencies are generated by large-scale production. 
D)  economic efficiency is only possible in the short run. 
A)  resources are not completely adaptable to alternative uses. 
B)  factors of production are limited and human wants are unlimited. 
C)  efficiencies are generated by large-scale production. 
D)  economic efficiency is only possible in the short run.

Question 20

Gary and Diane must prepare a presentation for their marketing class. As part of their presentation, they must do a series of calculations and prepare 50 PowerPoint slides. It would take Gary 10 hours to do the required calculation and 10 hours to prepare the slides. It would take Diane 12 hours to do the calculations and 20 hours to prepare the slides.
a. How much time would it take the two to complete the project if they divide the calculations equally and the slides equally?
b. How much time would it take the two to complete the project if they use comparative advantage and specialize in calculating or preparing slides?
c. If Diane and Gary have the same opportunity cost of €5 per hour, is there a better solution than for each to specialize in calculating or preparing slides?

Accepted Answer

a. If both tasks are divided equally, it

Exam 19: Interdependence and the Gains From Trade

If an economy is operating on its production possibilities frontier, it must produce less of one good if it produces more of another.

Table 1 shows the units of output a worker can produce per month in Australia and Korea. ? Food Electronics Australia 20 5 Korea 8 2 Refer to table 1. Korea should

Which of the following statements is true?

Exhibit 2 ​ Refer to Exhibit 2. If free trade is allowed, consumer surplus is the

Exhibit 3 ​ Refer to Exhibit 3. Government revenue from the tariff is the

Which of the following statements about import quotas is true?

Suppose a country's workers can produce 4 watches per hour or 12 rings per hour. If there is no trade, the opportunity cost of 1 watch is

Suppose the world price is below the before-trade domestic price for a good. If a country allows free trade in this good,

Comparative advantage, not absolute advantage, determines the decision to specialize in production.

Exhibit 2 ​ Refer to Exhibit 2. If trade is not allowed, producer surplus is the

Tariffs and quotas cause deadweight losses because they raise the price of the imported good and cause over-production and under-consumption of the good in the importing country.

According to the principle of comparative advantage, countries

Explain the difference between absolute advantage and comparative advantage. Which is more important in determining trade patterns, absolute advantage or comparative advantage? Why?

If a nation has an absolute advantage in the production of a good it:

Table 1 shows the units of output a worker can produce per month in Australia and Korea. ? Food Electronics Australia 20 5 Korea 8 2 ? Refer to table 1. Which of the following statements about comparative advantage is true?

If an economy is operating on its production possibilities frontier, it must be using its resources efficiently.

Opportunity costs change as an economy moves along its production possibilities frontier because

What Is Economics

Thinking Like an Economist

The Market Forces of Supply and Demand

Elasticity and Its Applications

Background to Demand: Consumer Choices

Background to Supply: Firms in Competitive Markets

Consumers, Producers and the Efficiency of Markets

Supply, Demand and Government Policies

The Tax System

Public Goods, Common Resources and Merit Goods

Market Failure and Externalities

Information and Behavioural Economics

Firms Production Decisions

Market Structures I: Monopoly

Market Structures Ii: Monopolistic Competition

Market Structures Iii: Oligopoly

The Economics of Factor Markets

Income Inequality and Poverty

Measuring a Nations Well-Being

Measuring the Cost of Living

Production and Growth

Unemployment

Saving, Investment and the Financial System

The Basic Tools of Finance

Issues in Financial Markets

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Business Cycles

Keynesian Economics and the Is-Lm Analysis

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Supply-Side Policies

Common Currency Areas and European Monetary Union

The Financial Crisis and Sovereign Debt

Filters

Exhibit 2 Refer to Exhibit 2. If free trade is allowed, consumer surplus is the

Exhibit 3 Refer to Exhibit 3. Government revenue from the tariff is the

Exhibit 2 Refer to Exhibit 2. If trade is not allowed, producer surplus is the