Question 1

Absolute advantage derives from which of the following?

Accepted Answer

A)  the lowest cost of production 
B)  the most suitable climate 
C)  the least expensive labor force 
D)  the best educated labor force 
A)  the lowest cost of production 
B)  the most suitable climate 
C)  the least expensive labor force 
D)  the best educated labor force

Question 2

A country has an absolute advantage in production if:

Accepted Answer

A)  it can produce the same good using fewer inputs than another country. 
B)  it can produce a good using fewer inputs than it takes another country to produce a different good. 
C)  other countries can produce the same good using fewer inputs. 
D)  it has the lowest opportunity cost of producing a good. 
A)  it can produce the same good using fewer inputs than another country. 
B)  it can produce a good using fewer inputs than it takes another country to produce a different good. 
C)  other countries can produce the same good using fewer inputs. 
D)  it has the lowest opportunity cost of producing a good.

Question 3

Trade makes rich people richer and poor people poorer.

Accepted Answer

A) True 
 B)False

Question 4

Globalization is:

Accepted Answer

A)  pushed through by politicians while citizens are reacting to disasters and upheavals. 
B)  the advance of human cooperation across national boundaries. 
C)  the advance of human conflict across national boundaries. 
D)  supported only by greedy corporations. 
A)  pushed through by politicians while citizens are reacting to disasters and upheavals. 
B)  the advance of human cooperation across national boundaries. 
C)  the advance of human conflict across national boundaries. 
D)  supported only by greedy corporations.

Question 5

Which of the following best explains the term "specialization" with respect to trade?

Accepted Answer

A)  Specialization occurs when a people concentrate their productive resources on the goods and services they can produce most efficiently. 
B)  Specialization occurs when one person can produce more of a particular good than another person. 
C)  Specialization refers to the absolute advantage that a person enjoys in the production of goods and services. 
D)  Specialization refers to the ability of a person to produce more of a good than his or her trading partners. 
A)  Specialization occurs when a people concentrate their productive resources on the goods and services they can produce most efficiently. 
B)  Specialization occurs when one person can produce more of a particular good than another person. 
C)  Specialization refers to the absolute advantage that a person enjoys in the production of goods and services. 
D)  Specialization refers to the ability of a person to produce more of a good than his or her trading partners.

Question 6

Figure: Benin   In the figure, Benin has 32 workers, and the price per ton of cotton and ton of rice is $2,500 and $1,200, respectively. The average wage with no trade is ______, and the average wage with trade is ________.

Accepted Answer

A)  $850; $1,081.25 
B)  $768.75; $1,000 
C)  $1,000; $850 
D)  $1,000; $1,081.25 
A)  $850; $1,081.25 
B)  $768.75; $1,000 
C)  $1,000; $850 
D)  $1,000; $1,081.25

Question 7

Which of the following is TRUE regarding trade and wages?

Accepted Answer

A)  Trade can increase wages by increasing the productivity of labor. 
B)  Trade helps to equalize wages between high- and low-productivity countries. 
C)  Countries with low productivity levels will always have lower wages than high-productivity nations whether they trade or not. 
D)  Trade directly increases productivity, which in turn increases wages. 
A)  Trade can increase wages by increasing the productivity of labor. 
B)  Trade helps to equalize wages between high- and low-productivity countries. 
C)  Countries with low productivity levels will always have lower wages than high-productivity nations whether they trade or not. 
D)  Trade directly increases productivity, which in turn increases wages.

Question 8

If a country has an absolute advantage in both items produced when compared to another country, there can never be any benefit for them to trade.

Accepted Answer

A) True 
 B)False

Question 9

New Zealand is more productive than Madagascar at producing all goods and services. In this situation:

Accepted Answer

A)  New Zealand might benefit by trading with Madagascar. 
B)  Madagascar would be harmed if it traded with New Zealand. 
C)  both countries would benefit from trading with each other. 
D)  New Zealand would see its standard of living decline if it traded with Madagascar. 
A)  New Zealand might benefit by trading with Madagascar. 
B)  Madagascar would be harmed if it traded with New Zealand. 
C)  both countries would benefit from trading with each other. 
D)  New Zealand would see its standard of living decline if it traded with Madagascar.

Question 10

The reason why Martha Stewart does not iron her own clothes is that:

Accepted Answer

A)  she has never learned how to iron. 
B)  she has a comparative advantage in ironing. 
C)  she does not have an absolute advantage in ironing. 
D)  her opportunity cost of ironing exceeds the person's wages providing the ironing service. 
A)  she has never learned how to iron. 
B)  she has a comparative advantage in ironing. 
C)  she does not have an absolute advantage in ironing. 
D)  her opportunity cost of ironing exceeds the person's wages providing the ironing service.

Question 11

Which of the following situations would lead to more starvation?

Accepted Answer

A)  a world where everyone grows his or her own food and there is no trade 
B)  a world with trade and lots of specialization 
C)  a world with immense division of knowledge 
D)  a world where only some people specialize in food and everyone else produces something else 
A)  a world where everyone grows his or her own food and there is no trade 
B)  a world with trade and lots of specialization 
C)  a world with immense division of knowledge 
D)  a world where only some people specialize in food and everyone else produces something else

Question 12

Without trade, specialization is impractical.

Accepted Answer

A) True 
 B)False

Question 13

Trade barriers like the Berlin Wall:

Accepted Answer

A)  increased the number of scientists and engineers. 
B)  added billions of minds to the global division of knowledge. 
C)  decreased innovation and global cooperation. 
D)  prevented restrictive monopolistic practices. 
A)  increased the number of scientists and engineers. 
B)  added billions of minds to the global division of knowledge. 
C)  decreased innovation and global cooperation. 
D)  prevented restrictive monopolistic practices.

Question 14

According to the theory of comparative advantage:

Accepted Answer

A)  every country can produce some good with a lower opportunity cost. 
B)  every country should produce goods that involve high opportunity costs. 
C)  some countries have a comparative advantage in producing every good. 
D)  some countries should import every good from other countries. 
A)  every country can produce some good with a lower opportunity cost. 
B)  every country should produce goods that involve high opportunity costs. 
C)  some countries have a comparative advantage in producing every good. 
D)  some countries should import every good from other countries.

Question 15

High-productivity workers fear trade because they think they cannot compete with workers in low-productivity countries. Low-productivity workers fear trade because they think they cannot compete with workers in high-productivity countries. Which of these fears is justified?

Accepted Answer

A)  The fears of workers in high-productivity countries are justified; the fears of workers in low-productivity countries are not. 
B)  The fears of workers in low-productivity countries are justified; the fears of workers in high-productivity countries are not. 
C)  Both sets of fears are justified. 
D)  Neither set of fears is justified. 
A)  The fears of workers in high-productivity countries are justified; the fears of workers in low-productivity countries are not. 
B)  The fears of workers in low-productivity countries are justified; the fears of workers in high-productivity countries are not. 
C)  Both sets of fears are justified. 
D)  Neither set of fears is justified.

Question 16

When comparing two countries with two goods each, if one country has a comparative advantage in one good, the other country will have a comparative advantage in the other good.

Accepted Answer

A) True 
 B)False

Question 17

Use the following to answer questions : Figure: Coffee and Tea
 
-Refer to the figure. Which of the following is NOT a possible production level?

Accepted Answer

A)  20 million pounds of tea, 140 million pounds of coffee 
B)  120 million pounds of tea, 80 million pounds of coffee 
C)  100 million pounds of tea, 120 million pounds of coffee 
D)  both a and b 
A)  20 million pounds of tea, 140 million pounds of coffee 
B)  120 million pounds of tea, 80 million pounds of coffee 
C)  100 million pounds of tea, 120 million pounds of coffee 
D)  both a and b

Question 18

Conan O'Brien hosts the Conan show and Andy Richter, his sidekick, writes for it. Conan needs 4 hours to rehearse and host a good show. It takes Andy 10 hours to do the same. Conan writes one usable joke in an hour, but Andy needs 2 hours to do the same. Gains from trade are largest when Conan hosts the show and Andy writes for the show.

Accepted Answer

A) True 
 B)False

Question 19

Because Chinese wages are much lower than wages in the United States, the Chinese can outcompete the United States in everything.

Accepted Answer

A) True 
 B)False

Question 20

Briefly describe a few activities that a typical student might do on any given day that reflect the effects of globalization.

Accepted Answer

This answer would of course be personali

Absolute advantage derives from which of the following?

A country has an absolute advantage in production if:

Trade makes rich people richer and poor people poorer.

Globalization is:

Which of the following best explains the term "specialization" with respect to trade?

Figure: Benin In the figure, Benin has 32 workers, and the price per ton of cotton and ton of rice is $2,500 and $1,200, respectively. The average wage with no trade is , and the average wage with trade is __.

Which of the following is TRUE regarding trade and wages?

If a country has an absolute advantage in both items produced when compared to another country, there can never be any benefit for them to trade.

New Zealand is more productive than Madagascar at producing all goods and services. In this situation:

The reason why Martha Stewart does not iron her own clothes is that:

Which of the following situations would lead to more starvation?

Without trade, specialization is impractical.

Trade barriers like the Berlin Wall:

According to the theory of comparative advantage:

High-productivity workers fear trade because they think they cannot compete with workers in low-productivity countries. Low-productivity workers fear trade because they think they cannot compete with workers in high-productivity countries. Which of these fears is justified?

When comparing two countries with two goods each, if one country has a comparative advantage in one good, the other country will have a comparative advantage in the other good.

Use the following to answer questions : Figure: Coffee and Tea -Refer to the figure. Which of the following is NOT a possible production level?

Because Chinese wages are much lower than wages in the United States, the Chinese can outcompete the United States in everything.

Briefly describe a few activities that a typical student might do on any given day that reflect the effects of globalization.

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

Absolute advantage derives from which of the following?

A country has an absolute advantage in production if:

Trade makes rich people richer and poor people poorer.

Globalization is:

Which of the following best explains the term "specialization" with respect to trade?

Figure: Benin In the figure, Benin has 32 workers, and the price per ton of cotton and ton of rice is $2,500 and $1,200, respectively. The average wage with no trade is ______, and the average wage with trade is ________.

Which of the following is TRUE regarding trade and wages?

If a country has an absolute advantage in both items produced when compared to another country, there can never be any benefit for them to trade.

New Zealand is more productive than Madagascar at producing all goods and services. In this situation:

The reason why Martha Stewart does not iron her own clothes is that:

Which of the following situations would lead to more starvation?

Without trade, specialization is impractical.

Trade barriers like the Berlin Wall:

According to the theory of comparative advantage:

High-productivity workers fear trade because they think they cannot compete with workers in low-productivity countries. Low-productivity workers fear trade because they think they cannot compete with workers in high-productivity countries. Which of these fears is justified?

When comparing two countries with two goods each, if one country has a comparative advantage in one good, the other country will have a comparative advantage in the other good.

Use the following to answer questions : Figure: Coffee and Tea -Refer to the figure. Which of the following is NOT a possible production level?

Because Chinese wages are much lower than wages in the United States, the Chinese can outcompete the United States in everything.

Briefly describe a few activities that a typical student might do on any given day that reflect the effects of globalization.

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

Figure: Benin In the figure, Benin has 32 workers, and the price per ton of cotton and ton of rice is $2,500 and $1,200, respectively. The average wage with no trade is , and the average wage with trade is __.