Exam 2: The Power of Trade and Comparative Advantage

Use the following to answer questions: Table: Production Possibilities for Italy and Belgium Labor Hours Needed to Make One Pound of: Pounds produced in hours: Linen Pasta Linen Pasta Italy 10 4 4 10 Belgium 2 8 20 5 -(Table: Production Possibilities for Italy and Belgium) According to the table on production possibilities for Italy and Belgium, Italy has comparative advantage in:

Gains from international trade are best characterized as potential gains from:

Which of the following is NOT true regarding the production possibilities frontier (PPF)?

Wage rates are primarily based on the:

A country has a comparative advantage in producing one good if its labor cost is lower than that for other countries.

When determining what a country should specialize in producing, economists chiefly consider:

Why do people specialize?

Adam Smith said, "It is the maxim of every prudent master of a family never to attempt to make at home what it will cost him more to make than to buy. The tailor does not attempt to make his own shoes, but buys them of the shoemaker. The shoemaker does not attempt to make his own clothes, but employs a tailor." Which of the following concepts best illustrates Smith's intent with this statement?

As trade becomes more widespread, specialization ______, which in turn ______ productivity.

Brazil can produce one unit of sugar cane for one unit of labor and one iPod for eight units of labor, and China can produce one unit of sugar cane for two units of labor and one iPod for four units of labor. Which of the following is true?

Use the following to answer questions: Table: Production Possibilities for Italy and Belgium Labor Hours Needed to Make One Pound of: Pounds produced in hours: Linen Pasta Linen Pasta Italy 10 4 4 10 Belgium 2 8 20 5 -(Table: Production Possibilities for Italy and Belgium) According to the table on production possibilities for Italy and Belgium, the opportunity cost of 1 pound of linen for Italy is:

Trade makes people better off only when they all have the same preferences.

According to the theory of comparative advantage, a country should specialize in producing a good that involves:

Economies can grow due to:

Use the following to answer questions: Table: Production Possibilities for the United States and Mexico Corn (millions of tons) Potatoes (millions of tons) United States 50 10 Mexico 40 5 -(Table: Production Possibilities for the United States and Mexico) According to the table on production possibilities for the United States and Mexico, the United States has an absolute advantage in ________ and a comparative advantage in _________.

Use the following to answer questions: Table: Production Possibilities for Italy and Belgium Labor Hours Needed to Make One Pound of: Pounds produced in hours: Linen Pasta Linen Pasta Italy 10 4 4 10 Belgium 2 8 20 5 -(Table: Production Possibilities for Italy and Belgium) According to the table on production possibilities for Italy and Belgium, the opportunity cost of 1 pound of pasta for Italy is:

A producer has a comparative advantage over other producers if his production of the good involves:

The better a person is at producing one good:

Which of the following statements is TRUE?

Poor countries are at a distinct disadvantage when it comes to economic production; they get outcompeted in everything since they do not have a comparative advantage in anything.