Question 1

Division of knowledge refers to:

Accepted Answer

A)  dividing tasks into different subtasks and having one person perform all these subtasks. 
B)  people learning different tasks in which they specialize. 
C)  assigning one person to learn all the different ways to perform the same task. 
D)  limiting what each person knows about another person. 
A)  dividing tasks into different subtasks and having one person perform all these subtasks. 
B)  people learning different tasks in which they specialize. 
C)  assigning one person to learn all the different ways to perform the same task. 
D)  limiting what each person knows about another person.

Question 2

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 3

Economic growth in the modern era is primarily due to the:

Accepted Answer

A)  increases in the number of people. 
B)  increases in money. 
C)  defining of nation borders. 
D)  creation of new knowledge. 
A)  increases in the number of people. 
B)  increases in money. 
C)  defining of nation borders. 
D)  creation of new knowledge.

Question 4

In the time it takes Stanley to clean the bathroom he can make three cheesecakes. In the time it takes Fran to clean the bathroom she can make two cheesecakes. Fran has a comparative advantage in cleaning the bathroom.

Accepted Answer

A) True 
 B)False

Question 5

Specialization in its comparative advantage and trading with other nations benefits a country in terms of its total output, but not individuals when it comes to their wages.

Accepted Answer

A) True 
 B)False

Question 6

Gains from trade are largest when two parties are similar in terms of preferences.

Accepted Answer

A) True 
 B)False

Question 7

According to the theory of comparative advantage, the reason wages are lower in China than in the United States is:

Accepted Answer

A)  the higher cost of living in the United States. 
B)  lower productivity in China. 
C)  the lower opportunity cost to work in China. 
D)  more trade restrictions in the United States. 
A)  the higher cost of living in the United States. 
B)  lower productivity in China. 
C)  the lower opportunity cost to work in China. 
D)  more trade restrictions in the United States.

Question 8

Suppose a country without any international trade opens its borders to international trade. After specialization how will its location on its production possibility frontier change?

Accepted Answer

A)  The country moves from inside the PPF to on the PPF. 
B)  The country moves from on the PPF to beyond the PPF. 
C)  The country moves along the PPF toward its comparative advantage. 
D)  The country moves along the PPF away from its comparative advantage. 
A)  The country moves from inside the PPF to on the PPF. 
B)  The country moves from on the PPF to beyond the PPF. 
C)  The country moves along the PPF toward its comparative advantage. 
D)  The country moves along the PPF away from its comparative advantage.

Question 9

Evidence from history shows that when the extent of trade expands, the result is prosperity.

Accepted Answer

A) True 
 B)False

Question 10

Suppose a famous baseball player, Alex Rodriguez, hires a high school student to paint his house. Which of the following is most likely TRUE?

Accepted Answer

A)  The opportunity cost of painting a house is higher for Alex Rodriguez than for the high school student. 
B)  The opportunity cost of painting a house is lower for Alex Rodriguez than for the high school student. 
C)  The opportunity cost of painting a house is the same for Alex Rodriguez as for the high school student. 
D)  The opportunity cost of painting a house is zero for Alex Rodriguez and is negative for the high school student. 
A)  The opportunity cost of painting a house is higher for Alex Rodriguez than for the high school student. 
B)  The opportunity cost of painting a house is lower for Alex Rodriguez than for the high school student. 
C)  The opportunity cost of painting a house is the same for Alex Rodriguez as for the high school student. 
D)  The opportunity cost of painting a house is zero for Alex Rodriguez and is negative for the high school student.

Question 11

A rock carving from ancient Norway depicts two identical people doing different jobs in the same boat: one uses a bow to hunt while the other paddles. How does this early example illustrate the benefits of trade?

Accepted Answer

A)  One prefers to hunt while the other prefers to paddle the boat; this is an example of diverse preferences. 
B)  One learns to be very good at paddling and one learns to be very good at hunting; this is an example of specialization and division of knowledge. 
C)  The paddler is stronger than the hunter so the paddler sacrifices a lot by hunting; this is an example of comparative advantage. 
D)  There is no trade in this example since no goods are being exchanged. 
A)  One prefers to hunt while the other prefers to paddle the boat; this is an example of diverse preferences. 
B)  One learns to be very good at paddling and one learns to be very good at hunting; this is an example of specialization and division of knowledge. 
C)  The paddler is stronger than the hunter so the paddler sacrifices a lot by hunting; this is an example of comparative advantage. 
D)  There is no trade in this example since no goods are being exchanged.

Question 12

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

Accepted Answer

A)  more inputs than those in other countries. 
B)  fewer inputs than those in other countries. 
C)  a higher opportunity cost than that of other countries. 
D)  a lower opportunity cost than that of other countries. 
A)  more inputs than those in other countries. 
B)  fewer inputs than those in other countries. 
C)  a higher opportunity cost than that of other countries. 
D)  a lower opportunity cost than that of other countries.

Question 13

The production possibilities frontier's negative slope illustrates the notion of trade-offs-producing more units of one good reduces the amount of another good's production.

Accepted Answer

A) True 
 B)False

Question 14

The production possibility frontier shows:

Accepted Answer

A)  how society can produce more of one good without giving up the production of another good. 
B)  what people can consume given different combinations of goods produced. 
C)  the combinations of output that an economy can produce given its productivity and supply of inputs. 
D)  the types of goods and services that society should produce to satisfy social interest. 
A)  how society can produce more of one good without giving up the production of another good. 
B)  what people can consume given different combinations of goods produced. 
C)  the combinations of output that an economy can produce given its productivity and supply of inputs. 
D)  the types of goods and services that society should produce to satisfy social interest.

Question 15

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, which of the following statements is true?

Accepted Answer

A)  The United States has a comparative advantage in clocks. 
B)  Germany has an absolute advantage in clocks and sofas. 
C)  The United States has a comparative advantage in sofas. 
D)  The United States has a comparative advantage in clocks and sofas. 
A)  The United States has a comparative advantage in clocks. 
B)  Germany has an absolute advantage in clocks and sofas. 
C)  The United States has a comparative advantage in sofas. 
D)  The United States has a comparative advantage in clocks and sofas.

Question 16

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 17

Anita is a wonderful baker and can bake 10 cakes in a day, but then has no time left to make cookies. If she bakes only cookies, she can make 200 cookies in a day. John can make equally delicious cakes and cookies but can only make seven cakes or 100 cookies in a day. Based on this information, which of the following statements is true?

Accepted Answer

A)  Anita should split her time between cakes and cookies. John should bake cakes. 
B)  Anita should bake cakes and John should bake cookies. 
C)  Anita and John should split their time equally between cakes and cookies. 
D)  Anita should bake cookies and John should bake cakes. 
A)  Anita should split her time between cakes and cookies. John should bake cakes. 
B)  Anita should bake cakes and John should bake cookies. 
C)  Anita and John should split their time equally between cakes and cookies. 
D)  Anita should bake cookies and John should bake cakes.

Question 18

Although trade increases productivity, it decreases society's collective knowledge because people specialize in a very limited number of things.

Accepted Answer

A) True 
 B)False

Question 19

Iceland produces two goods: Viking hats (Y) and fish (X). Its production possibilities frontier is characterized as: Y = 50 - 2X and tells us that the opportunity cost of catching (producing) an additional unit of fish in Iceland is:

Accepted Answer

A)  increasing in fish production. 
B)  constant in fish production. 
C)  decreasing in fish production. 
D)  unable to be determined from the information given. 
A)  increasing in fish production. 
B)  constant in fish production. 
C)  decreasing in fish production. 
D)  unable to be determined from the information given.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 2: The Power of Trade and Comparative

Division of knowledge refers to:

Globalization is:

Economic growth in the modern era is primarily due to the:

In the time it takes Stanley to clean the bathroom he can make three cheesecakes. In the time it takes Fran to clean the bathroom she can make two cheesecakes. Fran has a comparative advantage in cleaning the bathroom.

Specialization in its comparative advantage and trading with other nations benefits a country in terms of its total output, but not individuals when it comes to their wages.

Gains from trade are largest when two parties are similar in terms of preferences.

According to the theory of comparative advantage, the reason wages are lower in China than in the United States is:

Suppose a country without any international trade opens its borders to international trade. After specialization how will its location on its production possibility frontier change?

Evidence from history shows that when the extent of trade expands, the result is prosperity.

Suppose a famous baseball player, Alex Rodriguez, hires a high school student to paint his house. Which of the following is most likely TRUE?

A rock carving from ancient Norway depicts two identical people doing different jobs in the same boat: one uses a bow to hunt while the other paddles. How does this early example illustrate the benefits of trade?

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

The production possibilities frontier's negative slope illustrates the notion of trade-offs-producing more units of one good reduces the amount of another good's production.

The production possibility frontier shows:

Use the following to answer questions: Table: Production in the United States and Germany Labor units required to produce: One Clock One Sofa United States 2 5 Germany 3 9 -(Table: Production in the United States and Germany) According to the table, which of the following statements is true?

Although trade increases productivity, it decreases society's collective knowledge because people specialize in a very limited number of things.

Iceland produces two goods: Viking hats (Y) and fish (X). Its production possibilities frontier is characterized as: Y = 50 - 2X and tells us that the opportunity cost of catching (producing) an additional unit of fish in Iceland is:

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

The Big Ideas

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Oligopoly and Game Theory

Competing for Monopoly

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Price Discrimination

Consumer Choice

Filters