Question 1

Table 3-12
  
-Refer to Table 3-1.Relative to the farmer,the rancher has an absolute advantage in the production of

Accepted Answer

A)  meat,but not in the production of potatoes. 
B)  potatoes,but not in the production of meat. 
C)  both meat and potatoes. 
D)  neither meat nor potatoes. 
A)  meat,but not in the production of potatoes. 
B)  potatoes,but not in the production of meat. 
C)  both meat and potatoes. 
D)  neither meat nor potatoes. A

Question 2

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 productivity,as in the producer who can produce a product at a lower cost in terms of the resources used in production.Comparative advantage refers to the producer who can produce a product at a lower opportunity cost.Comparative advantage is the principle upon which trade patterns are based.Comparative advantage is based on opportunity cost,and opportunity cost measures the real cost to an individual or country of producing a particular product.Opportunity cost is therefore the information necessary for an individual or nation to determine whether to produce a good or buy it from someone else.

Question 3

Figure 3-3
Arturo’s Production Possibilities FrontierF  
Dina’s Production Possibilities  
-Refer to Figure 3-3.Arturo and Dina would not be able to gain from trade if Dina's opportunity cost of one taco changed to

Accepted Answer

A)  1/2 burrito. 
B)  3/4 burrito. 
C)  4/3 burritos. 
D)  2 burritos. 
A)  1/2 burrito. 
B)  3/4 burrito. 
C)  4/3 burritos. 
D)  2 burritos. B

Question 4

Ellie and Brendan both produce apple pies and vanilla ice cream.If Ellie's opportunity cost of one apple pie is 1/2 gallon of ice cream and Brendan's opportunity cost of one apple pie is 1/4 gallon of ice cream,Ellie has a comparative advantage in the production of ice cream.

Accepted Answer

A) True 
 B)False

Question 5

Figure 3-11
The graph below represents the various combinations of ham and cheese (in pounds)that the nation of Bonovia could produce in a given month.  
-Which of the following is not an example of the principle that trade can make everyone better off?

Accepted Answer

A)  Americans buy tube socks from China. 
B)  Residents of Maine drink orange juice from Florida. 
C)  A homeowner hires the kid next door to mow the lawn. 
D)  All of the above are examples of the principle that trade can make everyone better off. 
A)  Americans buy tube socks from China. 
B)  Residents of Maine drink orange juice from Florida. 
C)  A homeowner hires the kid next door to mow the lawn. 
D)  All of the above are examples of the principle that trade can make everyone better off.

Question 6

Figure 3-4
Perry’s Production Possibilities F  
Jordan’s Production Possibilities F 
-Refer to Figure 3-4.If Jordan must work 3 months to write each novel,then her production possibilities frontier is based on how many months of work?

Accepted Answer

A)  1 month 
B)  3 months 
C)  4 months 
D)  12 months 
A)  1 month 
B)  3 months 
C)  4 months 
D)  12 months

Question 7

If Korea is capable of producing either shoes or soccer balls or some combination of the two,then

Accepted Answer

A)  Korea should specialize in the product in which it has an absolute advantage. 
B)  it would be impossible for Korea to have an absolute advantage over another country in both products. 
C)  it would be difficult for Korea to benefit from trade with another country if Korea is efficient in the production of both goods. 
D)  Korea's opportunity cost of shoes is the inverse of its opportunity cost of soccer balls. 
A)  Korea should specialize in the product in which it has an absolute advantage. 
B)  it would be impossible for Korea to have an absolute advantage over another country in both products. 
C)  it would be difficult for Korea to benefit from trade with another country if Korea is efficient in the production of both goods. 
D)  Korea's opportunity cost of shoes is the inverse of its opportunity cost of soccer balls.

Question 8

Figure 3-9
Uzbekistan’s Production Possibilities F  
Azerbaijan’s Production Possibilities Frontier
 
-Refer to Figure 3-9.Suppose Uzbekistan decides to increase its production of bolts by 10.What is the opportunity cost of this decision?

Accepted Answer

A)  1/2 nail 
B)  2 nails 
C)  5 nails 
D)  20 nails 
A)  1/2 nail 
B)  2 nails 
C)  5 nails 
D)  20 nails

Question 9

Table 3-8
Assume that Huang and Min can switch between producing parasols and producing porcelain plates at a constant rate.
  
-Refer to Table 3-8.Min has an absolute advantage in the production of

Accepted Answer

A)  plates and a comparative advantage in the production of plates. 
B)  parasols and a comparative advantage in the production of plates. 
C)  neither good and a comparative advantage in the production of parasols. 
D)  neither good and a comparative advantage in the production of plates. 
A)  plates and a comparative advantage in the production of plates. 
B)  parasols and a comparative advantage in the production of plates. 
C)  neither good and a comparative advantage in the production of parasols. 
D)  neither good and a comparative advantage in the production of plates.

Question 10

Figure 3-7
Bintu’s Production Possibilities Frontier
  
Juba’s Production Possibilities Frontier
 
-Refer to Figure 3-7.Bintu has a comparative advantage in the production of

Accepted Answer

A)  bowls and Juba has a comparative advantage in the production of cups. 
B)  cups and Juba has a comparative advantage in the production of bowls. 
C)  both goods and Juba has a comparative advantage in the production of neither good. 
D)  neither good and Juba has a comparative advantage in the production of both goods. 
A)  bowls and Juba has a comparative advantage in the production of cups. 
B)  cups and Juba has a comparative advantage in the production of bowls. 
C)  both goods and Juba has a comparative advantage in the production of neither good. 
D)  neither good and Juba has a comparative advantage in the production of both goods.

Question 11

A person can benefit from specialization and trade by obtaining a good at a price that is

Accepted Answer

A)  lower than his or her opportunity cost of that good. 
B)  the same as his or her opportunity cost of that good. 
C)  higher than his or her opportunity cost of that good. 
D)  different than his or her opportunity cost of that good. 
A)  lower than his or her opportunity cost of that good. 
B)  the same as his or her opportunity cost of that good. 
C)  higher than his or her opportunity cost of that good. 
D)  different than his or her opportunity cost of that good.

Question 12

Timmy can edit 2 pages in one minute and he can type 80 words in one minute.Olivia can edit 1 page in one minute and she can type 100 words in one minute.Timmy has an absolute advantage and a comparative advantage in editing,while Olivia has an absolute advantage and a comparative advantage in typing.

Accepted Answer

A) True 
 B)False

Question 13

As long as two people have different opportunity costs,each can gain from trade with the other,since trade allows each person to obtain a good at a price lower than his or her opportunity cost.

Accepted Answer

A) True 
 B)False

Question 14

Table 3-12
  
-Refer to Table 3-1.For the farmer,12.8 pounds of

Accepted Answer

A)  meat is the opportunity cost of 10.6 pounds of potatoes. 
B)  meat is the opportunity cost of 16.0 pounds of potatoes. 
C)  potatoes is the opportunity cost of 6.8 pounds of meat. 
D)  potatoes is the opportunity cost of 8.0 pounds of meat. 
A)  meat is the opportunity cost of 10.6 pounds of potatoes. 
B)  meat is the opportunity cost of 16.0 pounds of potatoes. 
C)  potatoes is the opportunity cost of 6.8 pounds of meat. 
D)  potatoes is the opportunity cost of 8.0 pounds of meat.

Question 15

Table 3-7
Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate.
  
-Refer to Table 3-7.Japan has an absolute advantage in the production of

Accepted Answer

A)  cars and a comparative advantage in the production of cars. 
B)  cars and a comparative advantage in the production of airplanes. 
C)  neither good and a comparative advantage in the production of cars. 
D)  neither good and a comparative advantage in the production of airplanes. 
A)  cars and a comparative advantage in the production of cars. 
B)  cars and a comparative advantage in the production of airplanes. 
C)  neither good and a comparative advantage in the production of cars. 
D)  neither good and a comparative advantage in the production of airplanes.

Question 16

Figure 3-9
Uzbekistan’s Production Possibilities Frontier	F  
Azerbaijan’s Production Possibilities  
-Refer to Figure 3-9.If the production possibilities frontiers shown are each for two days of production,then which of the following combinations of bolts and nails could Uzbekistan and Azerbaijan together not make in a given 2-day production period?

Accepted Answer

A)  9 bolts and 122 nails 
B)  21 bolts and 98 nails 
C)  36 bolts and 56 nails 
D)  47 bolts and 18 nails 
A)  9 bolts and 122 nails 
B)  21 bolts and 98 nails 
C)  36 bolts and 56 nails 
D)  47 bolts and 18 nails

Question 17

Suppose the United States has a comparative advantage over Mexico in producing pork.The principle of comparative advantage asserts that

Accepted Answer

A)  the United States should produce more pork than what it requires and export some of it to Mexico. 
B)  the United States should produce a moderate quantity of pork and import the remainder of what it requires from Mexico. 
C)  the United States should refrain altogether from producing pork and import all of what it requires from Mexico. 
D)  Mexico has nothing to gain from importing United States pork. 
A)  the United States should produce more pork than what it requires and export some of it to Mexico. 
B)  the United States should produce a moderate quantity of pork and import the remainder of what it requires from Mexico. 
C)  the United States should refrain altogether from producing pork and import all of what it requires from Mexico. 
D)  Mexico has nothing to gain from importing United States pork.

Question 18

Figure 3-3
Arturo’s Production Possibilities FrontierF  
Dina’s Production Possibilities  
-Refer to Figure 3-3.Suppose Arturo is willing to trade 6 burritos to Dina for each 10 tacos that Dina produces and sends to Arturo.Which of the following combinations of tacos and burritos could Dina then consume,assuming Dina specializes in taco production and Arturo specializes in burrito production?

Accepted Answer

A)  100 tacos and 200 burritos 
B)  200 tacos and 130 burritos 
C)  300 tacos and 60 burritos 
D)  340 tacos and 40 burritos 
A)  100 tacos and 200 burritos 
B)  200 tacos and 130 burritos 
C)  300 tacos and 60 burritos 
D)  340 tacos and 40 burritos

Question 19

Opportunity cost measures the trade-off between two goods that each producer faces.

Accepted Answer

A) True 
 B)False

Question 20

Figure 3-7
Bintu’s Production Possibilities Frontier
  
Juba’s Production Possibilities Frontier
 
-Refer to Figure 3-7.The opportunity cost of 1 cup for Juba is

Accepted Answer

A)  1/6 bowl. 
B)  2/3 bowl. 
C)  3/2 bowls. 
D)  6 bowls. 
A)  1/6 bowl. 
B)  2/3 bowl. 
C)  3/2 bowls. 
D)  6 bowls.

Exam 3: Interdependence and the Gains From Trade

Table 3-12 -Refer to Table 3-1.Relative to the farmer,the rancher has an absolute advantage in the production of

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

Figure 3-3 Arturo’s Production Possibilities FrontierFrontier Dina’s Production Possibilities -Refer to Figure 3-3.Arturo and Dina would not be able to gain from trade if Dina's opportunity cost of one taco changed to

Ellie and Brendan both produce apple pies and vanilla ice cream.If Ellie's opportunity cost of one apple pie is 1/2 gallon of ice cream and Brendan's opportunity cost of one apple pie is 1/4 gallon of ice cream,Ellie has a comparative advantage in the production of ice cream.

Figure 3-11 The graph below represents the various combinations of ham and cheese (in pounds)that the nation of Bonovia could produce in a given month. -Which of the following is not an example of the principle that trade can make everyone better off?

Figure 3-4 Perry’s Production Possibilities Frontier Jordan’s Production Possibilities Frontier -Refer to Figure 3-4.If Jordan must work 3 months to write each novel,then her production possibilities frontier is based on how many months of work?

If Korea is capable of producing either shoes or soccer balls or some combination of the two,then

Figure 3-9 Uzbekistan’s Production Possibilities Frontier Azerbaijan’s Production Possibilities Frontier -Refer to Figure 3-9.Suppose Uzbekistan decides to increase its production of bolts by 10.What is the opportunity cost of this decision?

Table 3-8 Assume that Huang and Min can switch between producing parasols and producing porcelain plates at a constant rate. -Refer to Table 3-8.Min has an absolute advantage in the production of

Figure 3-7 Bintu’s Production Possibilities Frontier Juba’s Production Possibilities Frontier -Refer to Figure 3-7.Bintu has a comparative advantage in the production of

A person can benefit from specialization and trade by obtaining a good at a price that is

As long as two people have different opportunity costs,each can gain from trade with the other,since trade allows each person to obtain a good at a price lower than his or her opportunity cost.

Table 3-12 -Refer to Table 3-1.For the farmer,12.8 pounds of

Table 3-7 Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate. -Refer to Table 3-7.Japan has an absolute advantage in the production of

Suppose the United States has a comparative advantage over Mexico in producing pork.The principle of comparative advantage asserts that

Opportunity cost measures the trade-off between two goods that each producer faces.

Figure 3-7 Bintu’s Production Possibilities Frontier Juba’s Production Possibilities Frontier -Refer to Figure 3-7.The opportunity cost of 1 cup for Juba is

Ten Principles of Economics

Thinking Like an Economist

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply,demand,and Government Policies

Consumers,producers,and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Market for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving,investment,and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomic Models

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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