Question 1

Trade works best between people who share similar preferences.

Accepted Answer

A) True 
 B)False

Question 2

Globalization is best described as:

Accepted Answer

A)  a new process. 
B)  an old process that has consistently grown. 
C)  an old process that has grown intermittently. 
D)  an old process that has declined over time. 
A)  a new process. 
B)  an old process that has consistently grown. 
C)  an old process that has grown intermittently. 
D)  an old process that has declined over time.

Question 3

Jack and Jill work at a bakery. In one hour, Jack can decorate either 5 ice-cream cakes or 2 wedding cakes. In one hour, Jill can decorate either 4 ice-cream cakes or 1 wedding cake. According to this scenario, _____ has a comparative advantage in decorating ice-cream cakes and _____ has a comparative advantage in decorating wedding cakes.

Accepted Answer

A)  Jack; Jack 
B)  Jill; Jill 
C)  Jack; Jill 
D)  Jill; Jack 
A)  Jack; Jack 
B)  Jill; Jill 
C)  Jack; Jill 
D)  Jill; Jack

Question 4

In Colombia, it takes three workers to produce two pounds of coffee. In Mexico, it takes four workers to produce one pound of coffee. Therefore:

Accepted Answer

A)  Colombia has a comparative advantage in the production of coffee. 
B)  Mexico has a comparative advantage in the production of coffee. 
C)  in Colombia, the opportunity cost of producing one pound of coffee is two-thirds. 
D)  Colombia has an absolute advantage in the production of coffee. 
A)  Colombia has a comparative advantage in the production of coffee. 
B)  Mexico has a comparative advantage in the production of coffee. 
C)  in Colombia, the opportunity cost of producing one pound of coffee is two-thirds. 
D)  Colombia has an absolute advantage in the production of coffee.

Question 5

According to Adam Smith:

Accepted Answer

A)  trade is a way for rich people to exploit poor people. 
B)  trade within a nation benefits people but international trade does not. 
C)  trade does not benefit anyone. 
D)  people buy goods for which they have higher opportunity costs than others. 
A)  trade is a way for rich people to exploit poor people. 
B)  trade within a nation benefits people but international trade does not. 
C)  trade does not benefit anyone. 
D)  people buy goods for which they have higher opportunity costs than others.

Question 6

Use the following to answer questions: Figure: Rice and Shirts  
-(Figure: Rice and Shirts) Use the PPFs shown for the United States and India. With specialization and trade, the United States would produce ________ and India would produce _________.

Accepted Answer

A)  50 pounds of rice and 0 shirts; 0 pounds of rice and 35 shirts 
B)  30 pounds of rice and 16 shirts; 11.4 pounds of rice and 15 shirts 
C)  0 pounds of rice and 40 shirts; 20 pounds of rice and 0 shirts 
D)  50 pounds of rice and 40 shirts; 20 pounds of rice and 35 shirts 
A)  50 pounds of rice and 0 shirts; 0 pounds of rice and 35 shirts 
B)  30 pounds of rice and 16 shirts; 11.4 pounds of rice and 15 shirts 
C)  0 pounds of rice and 40 shirts; 20 pounds of rice and 0 shirts 
D)  50 pounds of rice and 40 shirts; 20 pounds of rice and 35 shirts

Question 7

Specialization and the division of knowledge decreased with the fall of the Berlin Wall and the opening of China's economy to the world.

Accepted Answer

A) True 
 B)False

Question 8

Trade tends to:

Accepted Answer

A)  increase wages in developed countries, but decrease wages in lesser-developed countries. 
B)  decrease wages in developed countries, but increase wages in lesser-developed countries. 
C)  decrease wages in all countries. 
D)  increase wages in all countries. 
A)  increase wages in developed countries, but decrease wages in lesser-developed countries. 
B)  decrease wages in developed countries, but increase wages in lesser-developed countries. 
C)  decrease wages in all countries. 
D)  increase wages in all countries.

Question 9

Trade makes people better off when:

Accepted Answer

A)  everyone wants the same things as other people. 
B)  some people are less productive than others. 
C)  people cannot specialize in certain activities. 
D)  people have different preferences. 
A)  everyone wants the same things as other people. 
B)  some people are less productive than others. 
C)  people cannot specialize in certain activities. 
D)  people have different preferences.

Question 10

Comparative advantage occurs when an individual's opportunity cost for producing the same good or service is lower than that of another individual.

Accepted Answer

A) True 
 B)False

Question 11

Trade causes wages in countries with high productivity to increase and wages in countries with low productivity to decrease.

Accepted Answer

A) True 
 B)False

Question 12

The Dark Ages was a period in which trade:

Accepted Answer

A)  expanded because of rising transportation and communication costs. 
B)  expanded because of falling transportation and communication costs. 
C)  decreased because world markets became more isolated. 
D)  decreased because world markets became less isolated. 
A)  expanded because of rising transportation and communication costs. 
B)  expanded because of falling transportation and communication costs. 
C)  decreased because world markets became more isolated. 
D)  decreased because world markets became less isolated.

Question 13

How is slope, measured as rise over run, related to the production possibilities frontier?

Accepted Answer

A)  Slope measures the fixed costs of producing Good X and Good Y. For a slope of -3, the fixed cost of producing either Good X or Good Y is $3 multiplied by the number of units produced. 
B)  Slope gives the opportunity cost of producing an additional unit of the good on the x-axis. So, if the slope is -3, the country must give up producing one-third of a unit of Good Y for every additional unit of Good X it produces. 
C)  Slope gives the fixed cost of producing an additional unit of the good on the x-axis. So, if the slope is -3, the country must give up producing one-third of a unit of Good Y for every additional unit of Good X it produces. 
D)  Slope gives the opportunity cost of producing an additional unit of the good on the x-axis. So, if the slope is -3, the country must give up producing 3 units of Good Y for every additional unit of Good X it produces. 
A)  Slope measures the fixed costs of producing Good X and Good Y. For a slope of -3, the fixed cost of producing either Good X or Good Y is $3 multiplied by the number of units produced. 
B)  Slope gives the opportunity cost of producing an additional unit of the good on the x-axis. So, if the slope is -3, the country must give up producing one-third of a unit of Good Y for every additional unit of Good X it produces. 
C)  Slope gives the fixed cost of producing an additional unit of the good on the x-axis. So, if the slope is -3, the country must give up producing one-third of a unit of Good Y for every additional unit of Good X it produces. 
D)  Slope gives the opportunity cost of producing an additional unit of the good on the x-axis. So, if the slope is -3, the country must give up producing 3 units of Good Y for every additional unit of Good X it produces.

Question 14

The benefits of economies of scale and increased competition to an economy include lower unit costs.

Accepted Answer

A) True 
 B)False

Question 15

According to the theory of comparative advantage, a country specializes in producing goods with lower opportunity costs than in another country.

Accepted Answer

A) True 
 B)False

Question 16

According to the textbook, globalization:

Accepted Answer

A)  never took place. 
B)  began as far back as the Roman Empire. 
C)  began in the twenty-first century. 
D)  occurred only during the Dark Ages. 
A)  never took place. 
B)  began as far back as the Roman Empire. 
C)  began in the twenty-first century. 
D)  occurred only during the Dark Ages.

Question 17

Use the following to answer questions: Figure: Sofas and Windows  
-(Figure: Sofas and Windows) In the PPF diagram, what is the opportunity cost of producing an additional window?

Accepted Answer

A)  1 1/4 sofas 
B)  4/5 of a window 
C)  1 window 
D)  4/5 of a sofa 
A)  1 1/4 sofas 
B)  4/5 of a window 
C)  1 window 
D)  4/5 of a sofa

Question 18

Trades are considered zero-sum transactions since when one person gains, the other loses an equal amount.

Accepted Answer

A) True 
 B)False

Question 19

Figure: Drums and Shoes.  
Given the graph of the production possibilities frontier in the figure, which of the following statements is TRUE?

Accepted Answer

A)  The country has 2 units of labor, and it takes 0.5 units of labor to produce 1 unit of either good. 
B)  The country has 3 units of labor, and it takes 1 unit of labor to produce 3 drums and 1 unit of labor to produce 3 1/3 pairs of shoes. 
C)  The country has 4 units of labor, and it takes 2 units of labor to produce 8 drums and 3 units of labor to produce 3 shoes. 
D)  The country has 5 units of labor, and it takes 1 unit of labor to produce 1.8 drums and 1 unit of labor to produce 2.5 shoes. 
A)  The country has 2 units of labor, and it takes 0.5 units of labor to produce 1 unit of either good. 
B)  The country has 3 units of labor, and it takes 1 unit of labor to produce 3 drums and 1 unit of labor to produce 3 1/3 pairs of shoes. 
C)  The country has 4 units of labor, and it takes 2 units of labor to produce 8 drums and 3 units of labor to produce 3 shoes. 
D)  The country has 5 units of labor, and it takes 1 unit of labor to produce 1.8 drums and 1 unit of labor to produce 2.5 shoes.

Question 20

Your professor hires a teaching assistant to grade student assignments even though he may do the task faster and perhaps more accurately. How can you explain this behavior using the theory of comparative advantage?

Accepted Answer

According to the theory of comparative a

Trade works best between people who share similar preferences.

Globalization is best described as:

In Colombia, it takes three workers to produce two pounds of coffee. In Mexico, it takes four workers to produce one pound of coffee. Therefore:

According to Adam Smith:

Use the following to answer questions: Figure: Rice and Shirts -(Figure: Rice and Shirts) Use the PPFs shown for the United States and India. With specialization and trade, the United States would produce and India would produce _.

Specialization and the division of knowledge decreased with the fall of the Berlin Wall and the opening of China's economy to the world.

Trade tends to:

Trade makes people better off when:

Comparative advantage occurs when an individual's opportunity cost for producing the same good or service is lower than that of another individual.

Trade causes wages in countries with high productivity to increase and wages in countries with low productivity to decrease.

The Dark Ages was a period in which trade:

How is slope, measured as rise over run, related to the production possibilities frontier?

The benefits of economies of scale and increased competition to an economy include lower unit costs.

According to the theory of comparative advantage, a country specializes in producing goods with lower opportunity costs than in another country.

According to the textbook, globalization:

Use the following to answer questions: Figure: Sofas and Windows -(Figure: Sofas and Windows) In the PPF diagram, what is the opportunity cost of producing an additional window?

Trades are considered zero-sum transactions since when one person gains, the other loses an equal amount.

Figure: Drums and Shoes. Given the graph of the production possibilities frontier in the figure, which of the following statements is TRUE?

Your professor hires a teaching assistant to grade student assignments even though he may do the task faster and perhaps more accurately. How can you explain this behavior using the theory of comparative advantage?

The Big Ideas

Supply and Demand

Equilibrium: How Supply and Demand Determine Prices

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth, Capital Accumulation and the Economics of Ideas: Catching up Vs the Cutting Edge

Saving, Investment, and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations: Aggregate Demand and Supply

Transmission and Amplification Mechanisms

The Federal Reserve System and Open Market Operations

Monetary Policy

The Federal Budget: Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters

Exam 2: The Power of Trade and Comparative Advantage

Trade works best between people who share similar preferences.

Globalization is best described as:

In Colombia, it takes three workers to produce two pounds of coffee. In Mexico, it takes four workers to produce one pound of coffee. Therefore:

According to Adam Smith:

Use the following to answer questions: Figure: Rice and Shirts -(Figure: Rice and Shirts) Use the PPFs shown for the United States and India. With specialization and trade, the United States would produce ________ and India would produce _________.

Specialization and the division of knowledge decreased with the fall of the Berlin Wall and the opening of China's economy to the world.

Trade tends to:

Trade makes people better off when:

Comparative advantage occurs when an individual's opportunity cost for producing the same good or service is lower than that of another individual.

Trade causes wages in countries with high productivity to increase and wages in countries with low productivity to decrease.

The Dark Ages was a period in which trade:

How is slope, measured as rise over run, related to the production possibilities frontier?

The benefits of economies of scale and increased competition to an economy include lower unit costs.

According to the theory of comparative advantage, a country specializes in producing goods with lower opportunity costs than in another country.

According to the textbook, globalization:

Use the following to answer questions: Figure: Sofas and Windows -(Figure: Sofas and Windows) In the PPF diagram, what is the opportunity cost of producing an additional window?

Trades are considered zero-sum transactions since when one person gains, the other loses an equal amount.

Figure: Drums and Shoes. Given the graph of the production possibilities frontier in the figure, which of the following statements is TRUE?

Your professor hires a teaching assistant to grade student assignments even though he may do the task faster and perhaps more accurately. How can you explain this behavior using the theory of comparative advantage?

The Big Ideas

Supply and Demand

Equilibrium: How Supply and Demand Determine Prices

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth, Capital Accumulation and the Economics of Ideas: Catching up Vs the Cutting Edge

Saving, Investment, and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations: Aggregate Demand and Supply

Transmission and Amplification Mechanisms

The Federal Reserve System and Open Market Operations

Monetary Policy

The Federal Budget: Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters

Use the following to answer questions: Figure: Rice and Shirts -(Figure: Rice and Shirts) Use the PPFs shown for the United States and India. With specialization and trade, the United States would produce and India would produce _.