Question 1

Which of the following is typically a result of the division of knowledge?

Accepted Answer

A)  The society runs with the knowledge of a few persons. 
B)  Each person has the same knowledge as everyone else. 
C)  Labor productivity is higher.. 
D)  No one specializes in any activity. 
A)  The society runs with the knowledge of a few persons. 
B)  Each person has the same knowledge as everyone else. 
C)  Labor productivity is higher.. 
D)  No one specializes in any activity.

Question 2

Trade increases productivity when production is carried out by the person/group with the comparative advantage.

Accepted Answer

A) True 
 B)False

Question 3

The economist credited with saying, "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," is Adam Smith.

Accepted Answer

A) True 
 B)False

Question 4

Use the following to answer questions: Figure: Computers and Books  
-(Figure: Computers and Books) According to the figure, the opportunity cost of producing books:

Accepted Answer

A)  is higher for country A than for country B 
B)  is higher for country B than for country A. 
C)  is the same for countries A and B. 
D)  cannot be determined. 
A)  is higher for country A than for country B 
B)  is higher for country B than for country A. 
C)  is the same for countries A and B. 
D)  cannot be determined.

Question 5

Owen Wilson is an actor who has acted in many action comedy films. In contrast, Tom Cruise has acted in many serious action films. How might the theory of specialization be applied to them?

Accepted Answer

A)  Owen Wilson has fully specialized in action comedy movies while Tom Cruise has fully specialized in serious action movies. 
B)  Due to filmography protectionism, Owen Wilson is unable to secure serious action roles, and Tom Cruise is unable to secure action comedy roles. 
C)  Casting directors see Owen Wilson as relatively better at action comedy roles and Tom Cruise as relatively better at serious action roles and cast them accordingly. 
D)  Owen Wilson does not have the talent necessary to act in more serious films. 
A)  Owen Wilson has fully specialized in action comedy movies while Tom Cruise has fully specialized in serious action movies. 
B)  Due to filmography protectionism, Owen Wilson is unable to secure serious action roles, and Tom Cruise is unable to secure action comedy roles. 
C)  Casting directors see Owen Wilson as relatively better at action comedy roles and Tom Cruise as relatively better at serious action roles and cast them accordingly. 
D)  Owen Wilson does not have the talent necessary to act in more serious films.

Question 6

Use the following to answer questions: Figure: PPF Nickel & Textiles  
-(Figure: PPF Nickel & Textiles) Refer to the figure. What is the maximum amount of textiles China can produce?

Accepted Answer

A)  10 tons 
B)  8 tons 
C)  6 tons 
D)  4 tons 
A)  10 tons 
B)  8 tons 
C)  6 tons 
D)  4 tons

Question 7

Some countries have comparative advantages in everything.

Accepted Answer

A) True 
 B)False

Question 8

Martha Stewart does not do her own ironing because she:

Accepted Answer

A)  is not very good at ironing. 
B)  has an absolute advantage in ironing. 
C)  has a comparative advantage in something else. 
D)  has a comparative advantage in ironing. 
A)  is not very good at ironing. 
B)  has an absolute advantage in ironing. 
C)  has a comparative advantage in something else. 
D)  has a comparative advantage in ironing.

Question 9

If you have a comparative advantage in washing dishes, then you also have an absolute advantage in washing dishes.

Accepted Answer

A) True 
 B)False

Question 10

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 sofa?

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 11

Use the following to answer questions: Table: Production Possibilities for Kenya and Sri Lanka $$\begin{array} { l c c } 
\hline & \text { Beans (millions of tons) } & \text { Tea (millions of tons) } \
\hline \text { Kenya } & 100 & 200 \
\text { Sri Lanka } & 150 & 450 \
\hline
\end{array}$$
-(Table: Production Possibilities for Kenya and Sri Lanka) According to the table on production possibilities for Kenya and Sri Lanka, Kenya should produce ________ and Sri Lanka should produce __________.

Accepted Answer

A)  beans; tea 
B)  tea; beans 
C)  both goods; neither good 
D)  neither good; both goods 
A)  beans; tea 
B)  tea; beans 
C)  both goods; neither good 
D)  neither good; both goods

Question 12

Use the following to answer questions: Table: iPhone and iPod Production $$\begin{array} { l c c } 
\hline & \text { One iPhone } & \text { One iPod } \
\hline \text { Canadian labor units } & 3 & 4 \
\text { United States labor units } & 2 & 2 \
\hline
\end{array}$$
-(Table: iPhone and iPod Production) According to the table on iPhone and iPod production, which of the following is TRUE about Canadian and U.S. comparative advantages?

Accepted Answer

A)  Canada has a comparative advantage in producing both iPhones and iPods. 
B)  The United States has a comparative advantage in producing both iPhones and iPods. 
C)  Canada has a comparative advantage in producing iPhones, and the United States has a comparative advantage in producing iPods. 
D)  Canada has a comparative advantage in producing iPods, and the United States has a comparative advantage in producing iPhones. 
A)  Canada has a comparative advantage in producing both iPhones and iPods. 
B)  The United States has a comparative advantage in producing both iPhones and iPods. 
C)  Canada has a comparative advantage in producing iPhones, and the United States has a comparative advantage in producing iPods. 
D)  Canada has a comparative advantage in producing iPods, and the United States has a comparative advantage in producing iPhones.

Question 13

A country has a comparative advantage in producing a good when it produces that good:

Accepted Answer

A)  at a lower opportunity cost than another country. 
B)  at a higher opportunity cost than another country. 
C)  in greater quantity than another country. 
D)  with fewer inputs than another country. 
A)  at a lower opportunity cost than another country. 
B)  at a higher opportunity cost than another country. 
C)  in greater quantity than another country. 
D)  with fewer inputs than another country.

Question 14

Countries can benefit from trading with one another because trade allows each country to specialize in doing what it does best.

Accepted Answer

A) True 
 B)False

Question 15

The enormous variety of goods and services that we consume each day can be attributed mainly to:

Accepted Answer

A)  government regulations. 
B)  home production. 
C)  specialization and trade. 
D)  early craftsmen handing down their knowledge. 
A)  government regulations. 
B)  home production. 
C)  specialization and trade. 
D)  early craftsmen handing down their knowledge.

Question 16

Increased trade has also led to:

Accepted Answer

A)  increased globalization of economies. 
B)  a more equal distribution of wealth across countries. 
C)  a decline in human cooperation. 
D)  more specialization and thus less globalization. 
A)  increased globalization of economies. 
B)  a more equal distribution of wealth across countries. 
C)  a decline in human cooperation. 
D)  more specialization and thus less globalization.

Question 17

One of the ways trade increases wealth is by taking advantage of differences in preferences.

Accepted Answer

A) True 
 B)False

Question 18

If each of us had to grow all of our own food:

Accepted Answer

A)  civilization would collapse and billions of people would starve. 
B)  we would have more time for other pursuits. 
C)  people would be richer since they would no longer have to spend money on groceries. 
D)  the total amount of knowledge in society would increase since everyone would have to learn about farming. 
A)  civilization would collapse and billions of people would starve. 
B)  we would have more time for other pursuits. 
C)  people would be richer since they would no longer have to spend money on groceries. 
D)  the total amount of knowledge in society would increase since everyone would have to learn about farming.

Question 19

Use the following to answer questions: Table: Production in the United States and Germany $$\begin{array}{l}
\text { Labor units required to produce: }\
\begin{array} { l c c } 
& \text { One Clock } & \text { One Sofa } \
\hline \text { United States } & 2 & 5 \
\text { Germany } & 3 & 9 \
\hline
\end{array}
\end{array}$$
-(Table: Production in the United States and Germany) According to the table, the opportunity cost of producing one sofa in the United States is _________, and the opportunity cost of producing one sofa in Germany is _______.

Accepted Answer

A)  two clocks; three clocks 
B)  10 clocks; 27 clocks 
C)  0.4 clocks; 0.33 clocks 
D)  2.5 clocks; three clocks 
A)  two clocks; three clocks 
B)  10 clocks; 27 clocks 
C)  0.4 clocks; 0.33 clocks 
D)  2.5 clocks; three clocks

Question 20

The main reason why specialization can raise productivity is that:

Accepted Answer

A)  knowledge in human brains is limited. 
B)  some persons have more knowledge than others. 
C)  it is always good to know less than more. 
D)  it is impossible to learn anything well. 
A)  knowledge in human brains is limited. 
B)  some persons have more knowledge than others. 
C)  it is always good to know less than more. 
D)  it is impossible to learn anything well.

Which of the following is typically a result of the division of knowledge?

Trade increases productivity when production is carried out by the person/group with the comparative advantage.

The economist credited with saying, "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," is Adam Smith.

Use the following to answer questions: Figure: Computers and Books -(Figure: Computers and Books) According to the figure, the opportunity cost of producing books:

Owen Wilson is an actor who has acted in many action comedy films. In contrast, Tom Cruise has acted in many serious action films. How might the theory of specialization be applied to them?

Use the following to answer questions: Figure: PPF Nickel & Textiles -(Figure: PPF Nickel & Textiles) Refer to the figure. What is the maximum amount of textiles China can produce?

Some countries have comparative advantages in everything.

Martha Stewart does not do her own ironing because she:

If you have a comparative advantage in washing dishes, then you also have an absolute advantage in washing dishes.

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 sofa?

A country has a comparative advantage in producing a good when it produces that good:

Countries can benefit from trading with one another because trade allows each country to specialize in doing what it does best.

The enormous variety of goods and services that we consume each day can be attributed mainly to:

Increased trade has also led to:

One of the ways trade increases wealth is by taking advantage of differences in preferences.

If each of us had to grow all of our own food:

The main reason why specialization can raise productivity is that:

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

Which of the following is typically a result of the division of knowledge?

Trade increases productivity when production is carried out by the person/group with the comparative advantage.

The economist credited with saying, "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," is Adam Smith.

Use the following to answer questions: Figure: Computers and Books -(Figure: Computers and Books) According to the figure, the opportunity cost of producing books:

Owen Wilson is an actor who has acted in many action comedy films. In contrast, Tom Cruise has acted in many serious action films. How might the theory of specialization be applied to them?

Use the following to answer questions: Figure: PPF Nickel & Textiles -(Figure: PPF Nickel & Textiles) Refer to the figure. What is the maximum amount of textiles China can produce?

Some countries have comparative advantages in everything.

Martha Stewart does not do her own ironing because she:

If you have a comparative advantage in washing dishes, then you also have an absolute advantage in washing dishes.

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 sofa?

A country has a comparative advantage in producing a good when it produces that good:

Countries can benefit from trading with one another because trade allows each country to specialize in doing what it does best.

The enormous variety of goods and services that we consume each day can be attributed mainly to:

Increased trade has also led to:

One of the ways trade increases wealth is by taking advantage of differences in preferences.

If each of us had to grow all of our own food:

The main reason why specialization can raise productivity is that:

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