Question 1

Absolute advantage is the ability to produce a:

Accepted Answer

A)  good at a lower opportunity cost than others. 
B)  good with fewer inputs than others. 
C)  good when demand is high. 
D)  variety of goods. 
A)  good at a lower opportunity cost than others. 
B)  good with fewer inputs than others. 
C)  good when demand is high. 
D)  variety of goods.

Question 2

Which of the following statements is TRUE?

Accepted Answer

A)  Only a high-wage country can benefit by trading with a low-wage country. 
B)  A high-wage country cannot benefit by trading with a low-wage country. 
C)  Trade raises the wages of workers in low- and high-wage countries. 
D)  There is an inverse relationship between productivity and wages. 
A)  Only a high-wage country can benefit by trading with a low-wage country. 
B)  A high-wage country cannot benefit by trading with a low-wage country. 
C)  Trade raises the wages of workers in low- and high-wage countries. 
D)  There is an inverse relationship between productivity and wages.

Question 3

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 4

A production possibilities frontier shows:

Accepted Answer

A)  the supply and demand for a good in a country. 
B)  all combinations of goods that a country can produce given its productivity and supply of inputs. 
C)  the uninhabited territory of a country that is full of new possibilities. 
D)  the goods that a country will be able to produce in the future if it continues to grow. 
A)  the supply and demand for a good in a country. 
B)  all combinations of goods that a country can produce given its productivity and supply of inputs. 
C)  the uninhabited territory of a country that is full of new possibilities. 
D)  the goods that a country will be able to produce in the future if it continues to grow.

Question 5

Use the following to answer questions: Figure: Coffee and Tea  
-(Figure: Coffee and Tea) Refer to the figure. Despite its widespread popularity today, coffee wasn't consumed as a beverage until the mid-1400s. Tea was the beverage of choice, particularly in Southeast Asia. Before coffee, what was the total tea production? (Assume the only reason to grow coffee was for beverage purposes.)

Accepted Answer

A)  80,000,000 
B)  130,000,000 
C)  140,000,000 
D)  160,000,000 
A)  80,000,000 
B)  130,000,000 
C)  140,000,000 
D)  160,000,000

Question 6

Both Maria and Jorge bake cookies and bread, but Maria spends less time baking each batch of cookies and each loaf of bread than Jorge does. Which of the following is TRUE?

Accepted Answer

A)  Maria has an absolute advantage in baking both cookies and bread. 
B)  Maria has a comparative advantage in baking both cookies and bread. 
C)  Jorge has an absolute advantage in baking both cookies and bread. 
D)  Jorge has a comparative advantage in baking both cookies and bread. 
A)  Maria has an absolute advantage in baking both cookies and bread. 
B)  Maria has a comparative advantage in baking both cookies and bread. 
C)  Jorge has an absolute advantage in baking both cookies and bread. 
D)  Jorge has a comparative advantage in baking both cookies and bread.

Question 7

Traders should specialize in the good: that:

Accepted Answer

A)  that they can produce with the lowest opportunity cost. 
B)  in which they have an absolute advantage. 
C)  in which their trading partner has a comparative advantage. 
D)  in which they do not have an absolute advantage. 
A)  that they can produce with the lowest opportunity cost. 
B)  in which they have an absolute advantage. 
C)  in which their trading partner has a comparative advantage. 
D)  in which they do not have an absolute advantage.

Question 8

Trade leads to increased productivity because trade allows people to specialize.

Accepted Answer

A) True 
 B)False

Question 9

Jim has an old (working) television that he would like to get rid of now that he has purchased a new high-definition, flat-screen television. The old television is no longer worth anything to him now that he has his new flat-screen TV. Veronica on the other hand has an even older television that has just broken down. She would pay up to $50 for any working TV. If Jim trades Veronica his old television for $50, both are better off but total value in society does not increase.

Accepted Answer

A) True 
 B)False

Question 10

What are the three major benefits of trade? Explain briefly.

Accepted Answer

Trade requires people or countries to sp

Question 11

Use the following to answer questions: Figure: Rice and Shirts  
-(Figure: Rice and Shirts) Use the PPFs shown for the United States and India. If the United States and India specialize and trade, one country will trade away 20 pounds of rice in exchange for 20 shirts from the other. Compared with no trade, ______ will be able to consume ______ additional shirts, and _____ will be able to consume an additional ______ pounds of rice.

Accepted Answer

A)  the United States; 0; India; 8.6 
B)  India; 5; the United States; 0 
C)  the United States; 4; India; 8.6 
D)  India; 8.6; the United States; 4 
A)  the United States; 0; India; 8.6 
B)  India; 5; the United States; 0 
C)  the United States; 4; India; 8.6 
D)  India; 8.6; the United States; 4

Question 12

When a rich country that has absolute advantages in all products begins trading with a poor country:

Accepted Answer

A)  the wage in the rich country will go down and the wage in the poor country will go up. 
B)  the wages in both countries will go up. 
C)  the wages in both countries will go down. 
D)  the wage in the rich country will go up and the wage in the poor country will go down. 
A)  the wage in the rich country will go down and the wage in the poor country will go up. 
B)  the wages in both countries will go up. 
C)  the wages in both countries will go down. 
D)  the wage in the rich country will go up and the wage in the poor country will go down.

Question 13

Use the following to answer question 82:
Table: Production in France and Italy $$\begin{array}{l}
\text { Labor units required to produce: }\
\begin{array} { l c c } 
& \text { One Bag of Truffles } & \text { One Pair of Wool Socks } \
\hline \text { France } & 1 & 1 \
\text { Italy } & 2 & 4 \
\hline
\end{array}
\end{array}$$
-(Table: Production in France and Italy) According to the table, France should specialize in producing ________, and Italy should specialize in producing _______.

Accepted Answer

A)  truffles; wool socks 
B)  wool socks; truffles 
C)  truffles; truffles 
D)  wool socks; wool socks 
A)  truffles; wool socks 
B)  wool socks; truffles 
C)  truffles; truffles 
D)  wool socks; wool socks

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Use the following to answer questions: Figure: PPF Nickel & Textiles  
-(Figure: PPF Nickel & Textiles) Refer to the figure. What is the maximum amount of nickel 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 16

Use the following to answer questions: Figure: PPF Goods X & Y  
-(Figure: PPF Goods X & Y) Refer to the figure. Point A represents an allocation of resources that is:

Accepted Answer

A)  efficient. 
B)  inefficient. 
C)  impossible. 
D)  the result of trade. 
A)  efficient. 
B)  inefficient. 
C)  impossible. 
D)  the result of trade.

Question 17

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 18

Increased communication speed played a significant role in recent developments that led to increased trade and globalization?

Accepted Answer

A) True 
 B)False

Question 19

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. Conan's opportunity cost of writing a single usable joke is:

Accepted Answer

A)  0.2 units of hosting. 
B)  0.25 units of hosting. 
C)  0.5 units of hosting. 
D)  1 unit of hosting. 
A)  0.2 units of hosting. 
B)  0.25 units of hosting. 
C)  0.5 units of hosting. 
D)  1 unit of hosting.

Question 20

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, which of the following answers identifies a trade price that both countries would find acceptable? (Units are in tons.)

Accepted Answer

A)  0.5 bean for one tea < Trade price < two teas for one bean 
B)  0.5 bean for one tea < Trade price < three beans for one tea 
C)  two teas for one bean < Trade price < three teas for one bean 
D)  0.3 bean for one tea < Trade price < two beans for one tea 
A)  0.5 bean for one tea < Trade price < two teas for one bean 
B)  0.5 bean for one tea < Trade price < three beans for one tea 
C)  two teas for one bean < Trade price < three teas for one bean 
D)  0.3 bean for one tea < Trade price < two beans for one tea

Absolute advantage is the ability to produce a:

Which of the following statements is TRUE?

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?

A production possibilities frontier shows:

Both Maria and Jorge bake cookies and bread, but Maria spends less time baking each batch of cookies and each loaf of bread than Jorge does. Which of the following is TRUE?

Traders should specialize in the good: that:

Trade leads to increased productivity because trade allows people to specialize.

What are the three major benefits of trade? Explain briefly.

When a rich country that has absolute advantages in all products begins trading with a poor country:

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

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

Use the following to answer questions: Figure: PPF Goods X & Y -(Figure: PPF Goods X & Y) Refer to the figure. Point A represents an allocation of resources that is:

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

Increased communication speed played a significant role in recent developments that led to increased trade and globalization?

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

Exam 2: The Power of Trade and Comparative

Absolute advantage is the ability to produce a:

Which of the following statements is TRUE?

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?

A production possibilities frontier shows:

Both Maria and Jorge bake cookies and bread, but Maria spends less time baking each batch of cookies and each loaf of bread than Jorge does. Which of the following is TRUE?

Traders should specialize in the good: that:

Trade leads to increased productivity because trade allows people to specialize.

What are the three major benefits of trade? Explain briefly.

When a rich country that has absolute advantages in all products begins trading with a poor country:

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

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

Use the following to answer questions: Figure: PPF Goods X & Y -(Figure: PPF Goods X & Y) Refer to the figure. Point A represents an allocation of resources that is:

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

Increased communication speed played a significant role in recent developments that led to increased trade and globalization?

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