Question 1

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 2

Comparative advantage is determined by which of the following?

Accepted Answer

A)  efficiency 
B)  bargaining power 
C)  opportunity cost 
D)  productivity 
A)  efficiency 
B)  bargaining power 
C)  opportunity cost 
D)  productivity

Question 3

Reference: Ref 2-6 (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 4

Reference: Ref 2-2 (Figure: PPF Goods X & Y) Refer to the figure. Which of the points representing various consumption possibilities for the country portrayed above is only attainable through foreign trade?

Accepted Answer

A)  Point A 
B)  Point B 
C)  Point C 
A)  Point A 
B)  Point B 
C)  Point C

Question 5

With 24 units of labor and no trade Brazil produces and consumes eight units of sugar cane and two iPods. Sugar cane costs $50/unit, and iPods cost $200. After specialization and trade, Brazil consumes eight units of sugar cane and four iPods. What are wages in Brazil?

Accepted Answer

A)  $33 without trade and $50 with trade 
B)  $50 without trade and $75 with trade 
C)  $50 without trade and $33 with trade 
D)  $33 without trade and $75 with trade 
A)  $33 without trade and $50 with trade 
B)  $50 without trade and $75 with trade 
C)  $50 without trade and $33 with trade 
D)  $33 without trade and $75 with trade

Question 6

In a two-country world of Japan and Korea, suppose Japan can produce 600 radios or 300 TV sets in one day with all its available resources, while Korea can produce 100 radios or 200 TV sets in one day with all its available resources. According to the theory of comparative advantage, what would be the possible gain in this world if the two countries specialize and trade with each other?

Accepted Answer

For Japan, the opportunity cost of produ

Question 7

According to the textbook, the reason why Martha Stewart does not do her own ironing is that:

Accepted Answer

A)  she has never learned how to iron. 
B)  running her business enterprises just do not leave her enough time. 
C)  she does not have any real interest in ironing. 
D)  it costs her more to do her own ironing than to pay someone to iron. 
A)  she has never learned how to iron. 
B)  running her business enterprises just do not leave her enough time. 
C)  she does not have any real interest in ironing. 
D)  it costs her more to do her own ironing than to pay someone to iron.

Question 8

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 9

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 for which they each have a comparative advantage. 
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 for which they each have a comparative advantage. 
C)  assigning one person to learn all the different ways to perform the same task. 
D)  limiting what each person knows about another person.

Exam 2: The Power of Trade and Comparative Advantage

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

Comparative advantage is determined by which of the following?

Reference: Ref 2-6 (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 __________.

Reference: Ref 2-2 (Figure: PPF Goods X & Y) Refer to the figure. Which of the points representing various consumption possibilities for the country portrayed above is only attainable through foreign trade?

With 24 units of labor and no trade Brazil produces and consumes eight units of sugar cane and two iPods. Sugar cane costs $50/unit, and iPods cost $200. After specialization and trade, Brazil consumes eight units of sugar cane and four iPods. What are wages in Brazil?

According to the textbook, the reason why Martha Stewart does not do her own ironing is that:

Division of knowledge refers to:

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 2-6 (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 __.