Question 1

A production possibilities frontier shows the cost of the different goods that a country can produce.

Accepted Answer

A) True 
 B)False  False

Question 2

Increased trade has led to:

Accepted Answer

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

Question 3

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 could of course be personalized, but an example answer might be as follows: Globalization allows us to enjoy goods from around the world, and expand the variety of goods we consume as well as interact more with people from other countries and regions. A student wakes up in the morning to the ring of an alarm clock made in China. That student may then have breakfast that includes Colombian coffee, cereal that uses corn made in the United States, and bananas grown in Honduras. The student wears a shirt that has a "Made in Bangladesh" label. The student then picks up his or her textbooks made with paper that came from trees grown in Canada, and goes to class where the teacher is a visiting instructor from Turkey. In class the student sits between two other students from Iraq and Kenya. Later in the evening, the student unwinds by playing games on a Nintendo Wii made in Japan. Dinner might consist of Indian cuisine, and dessert might be Italian tiramisu. Finally, the student goes back to bed and sleeps under a blanket made in Korea.

Question 4

Reference: Ref 2-4 (Figure: PPF Mexico & U.S.) Use the above figure in which both Mexico and the United States each have 24 units of labor. Mexico has a comparative advantage in ______ and the United States has a comparative advantage in ______.

Accepted Answer

A)  computers; shirts 
B)  shirts; computers 
C)  computers; computers 
D)  shirts; shirts 
A)  computers; shirts 
B)  shirts; computers 
C)  computers; computers 
D)  shirts; shirts

Question 5

Which of the following is least likely a consequence of the division of knowledge?

Accepted Answer

A)  The development of the computer tablet. 
B)  A totally self-sufficient family farm. 
C)  A new delivery method for cancer-fighting drugs. 
D)  The provision of a new bike path in your community. 
A)  The development of the computer tablet. 
B)  A totally self-sufficient family farm. 
C)  A new delivery method for cancer-fighting drugs. 
D)  The provision of a new bike path in your community.

Question 6

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 7

Suppose the United States is more productive than China at producing both T-shirts and cell phones. The theory of comparative advantage suggests that consumption in both countries will:

Accepted Answer

A)  increase if the United States produces both goods. 
B)  increase if each country produces the good for which it has the lowest opportunity cost. 
C)  not change if China produces either T-shirts or cell phones. 
D)  remain the same since nothing can be done to increase production in the two countries. 
A)  increase if the United States produces both goods. 
B)  increase if each country produces the good for which it has the lowest opportunity cost. 
C)  not change if China produces either T-shirts or cell phones. 
D)  remain the same since nothing can be done to increase production in the two countries.

Question 8

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 9

Adam Smith advocated the benefits of:

Accepted Answer

A)  protectionism. 
B)  trade tariffs over trade quotas. 
C)  international trade. 
D)  comparative advantage. 
A)  protectionism. 
B)  trade tariffs over trade quotas. 
C)  international trade. 
D)  comparative advantage.

Question 10

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)  Low-productivity nations 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)  Low-productivity nations have lower wages than high-productivity nations whether they trade or not. 
D)  Trade directly increases productivity, which in turn increases wages.

Question 11

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 12

Who wrote, "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"?

Accepted Answer

A)  Richard Nixon 
B)  Dr. Spock 
C)  Adam Smith 
D)  David Ricardo 
A)  Richard Nixon 
B)  Dr. Spock 
C)  Adam Smith 
D)  David Ricardo

Question 13

The ability of one producer to produce one good or service using fewer inputs than another producer is:

Accepted Answer

A)  comparative advantage. 
B)  absolute advantage. 
C)  opportunity cost. 
D)  competition. 
A)  comparative advantage. 
B)  absolute advantage. 
C)  opportunity cost. 
D)  competition.

Question 14

Trade creates value because:

Accepted Answer

A)  people get what they want. 
B)  raw materials are transformed into finished products. 
C)  people exchange things they do not want for things they do. 
D)  idle resources are put to use. 
A)  people get what they want. 
B)  raw materials are transformed into finished products. 
C)  people exchange things they do not want for things they do. 
D)  idle resources are put to use.

Question 15

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 16

Reference: Ref 2-4 (Figure: PPF Mexico & U.S.) Use the figure in which both Mexico and the United States each have 24 units of labor. The opportunity costs of producing one shirt are:

Accepted Answer

A)  one computer for Mexico and 1/6 of a computer for the United States. 
B)  1/6 of a computer for Mexico and one computer for United States. 
C)  one computer for both Mexico and the United States. 
D)  1/6 of computer for both Mexico and the United States. 
A)  one computer for Mexico and 1/6 of a computer for the United States. 
B)  1/6 of a computer for Mexico and one computer for United States. 
C)  one computer for both Mexico and the United States. 
D)  1/6 of computer for both Mexico and the United States.

Question 17

Reference: Ref 2-7 (Table: Production Possibilities for Italy and Belgium) According to the table on Production Possibilities for Italy and Belgium, the opportunity cost of 1 pound of linen for Belgium is:

Accepted Answer

A)  5 pounds of pasta. 
B)  4 pounds of pasta. 
C)  1/4 pound of pasta. 
D)  20 pound of pasta. 
A)  5 pounds of pasta. 
B)  4 pounds of pasta. 
C)  1/4 pound of pasta. 
D)  20 pound of pasta.

Question 18

Globalization is the advance of human cooperation across national boundaries.

Accepted Answer

A) True 
 B)False

Question 19

Trade increases productivity because trade allows people to specialize.

Accepted Answer

A) True 
 B)False

Question 20

According to the theory of comparative advantage, a country specializes in producing what it can produce for a lower opportunity cost than another country.

Accepted Answer

A) True 
 B)False

Exam 2: The Power of Trade and Comparative Advantage

A production possibilities frontier shows the cost of the different goods that a country can produce.

Increased trade has led to:

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

Reference: Ref 2-4 (Figure: PPF Mexico & U.S.) Use the above figure in which both Mexico and the United States each have 24 units of labor. Mexico has a comparative advantage in ______ and the United States has a comparative advantage in ______.

Which of the following is least likely a consequence of the division of knowledge?

Which of the following situations would lead to more starvation?

Suppose the United States is more productive than China at producing both T-shirts and cell phones. The theory of comparative advantage suggests that consumption in both countries will:

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

Adam Smith advocated the benefits of:

Which of the following is TRUE regarding trade and wages?

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

Who wrote, "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"?

The ability of one producer to produce one good or service using fewer inputs than another producer is:

Trade creates value because:

According to the theory of comparative advantage:

Reference: Ref 2-4 (Figure: PPF Mexico & U.S.) Use the figure in which both Mexico and the United States each have 24 units of labor. The opportunity costs of producing one shirt are:

Reference: Ref 2-7 (Table: Production Possibilities for Italy and Belgium) According to the table on Production Possibilities for Italy and Belgium, the opportunity cost of 1 pound of linen for Belgium is:

Globalization is the advance of human cooperation across national boundaries.

Trade increases productivity because trade allows people to specialize.

According to the theory of comparative advantage, a country specializes in producing what it can produce for a lower opportunity cost than another country.

The Big Ideas in Economics

Business Fluctuations: Aggregate Demand and Supply

Equilibrium: How Supply and Demand Determine Prices

Elasticity and Its Applications

Taxes and Subsidies

The Price System: Signals, Speculation, and Prediction

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 and Pricing Strategy

Oligopoly and Game Theory

Competing for Monopoly: the Economics of Network Goods

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

Asymmetric Information: Moral Hazard and Adverse Selection

Consumer Choice

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

Supply and Demand

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Transmission and Amplification Mechanisms

The Federal Reserve System and Open Market Operations

Monetary Policy

The Federal Budget: Taxes and Spending

Filters

Reference: Ref 2-4 (Figure: PPF Mexico & U.S.) Use the above figure in which both Mexico and the United States each have 24 units of labor. Mexico has a comparative advantage in and the United States has a comparative advantage in .