Question 1

(Table: iPhone and iPod Production) According to the table oniPhone and iPod Production, which of the following is TRUE?

Accepted Answer

A) Canada has an absolute advantage in producing both iPhones and iPods. 
B) The United States has an absolute advantage in producing both iPhones and iPods. 
C) Canada has an absolute advantage in producing iPhones, and the United States has an absolute advantage in producing
IPods. 
D) The United States has an absolute advantage in producing iPhones, and Canada has an absolute advantage in producing
IPods. 
A) Canada has an absolute advantage in producing both iPhones and iPods. 
B) The United States has an absolute advantage in producing both iPhones and iPods. 
C) Canada has an absolute advantage in producing iPhones, and the United States has an absolute advantage in producing
IPods. 
D) The United States has an absolute advantage in producing iPhones, and Canada has an absolute advantage in producing
IPods. B

Question 2

Which of the following is NOT a reason trade increases wealth?

Accepted Answer

A) to take advantage of differences in productivity 
B) to take advantage of differences in preferences 
C) to take advantage of differences in knowledge 
D) to take advantage of differences in security (True Answer )Correct 
A) to take advantage of differences in productivity 
B) to take advantage of differences in preferences 
C) to take advantage of differences in knowledge 
D) to take advantage of differences in security (True Answer )Correct D

Question 3

Suppose France can produce four phones or three computerswith one unit of labor, and Sweden can produce one phone ortwo computers with one unit of labor. If France can trade onlywith Sweden, then the theory of comparative advantagesuggests that:

Accepted Answer

A) France should specialize in producing phones and import computers from Sweden. 
B) France should specialize in producing computers and import phones from Sweden. 
C) France should produce both phones and computers, and import nothing from Sweden. 
D) France should import both phones and computers from Sweden. 
A) France should specialize in producing phones and import computers from Sweden. 
B) France should specialize in producing computers and import phones from Sweden. 
C) France should produce both phones and computers, and import nothing from Sweden. 
D) France should import both phones and computers from Sweden. A

Question 4

The trade networks of the Roman Empire:

Accepted Answer

A) fell apart in the Medieval era, leading to the Dark Ages. 
B) were not of great importance even before the Dark Ages. 
C) show that globalization is a new phenomenon. 
D) did not facilitate the transport of goods from different parts of the world. 
A) fell apart in the Medieval era, leading to the Dark Ages. 
B) were not of great importance even before the Dark Ages. 
C) show that globalization is a new phenomenon. 
D) did not facilitate the transport of goods from different parts of the world.

Question 5

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 6

Which statement best describes why people choose tospecialize?

Accepted Answer

A) Training is too expensive to specialize in multiple occupations. 
B) Trade creates value. 
C) Specialization increases productivity. 
D) Specialization and trade allow them to consume more than they could produce individually. 
A) Training is too expensive to specialize in multiple occupations. 
B) Trade creates value. 
C) Specialization increases productivity. 
D) Specialization and trade allow them to consume more than they could produce individually.

Question 7

(Table: Production Possibilities for Italy and Belgium)According to the table on Production Possibilities for Italy andBelgium, the opportunity cost of 1 pound of linen for Belgiumis:

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 8

In Spain it takes 10 workers to produce one barrel of wine andfour workers to produce one yard of cloth. Thus, theopportunity cost of producing one barrel of wine is 2.5 yards ofcloth.

Accepted Answer

A) True 
 B)False

Question 9

Everyone, from the most to the least skilled to the most andleast educated, can benefit from trade.

Accepted Answer

A) True 
 B)False

Question 10

U.S. pharmaceutical companies sell drugs to Kenya, andKenyan farmers sell flowers to the U.S. This pattern of tradesuggests that the U.S. is the low-opportunity-cost producer ofdrugs and Kenya is the low-opportunity-cost producer offlowers.

Accepted Answer

A) True 
 B)False

Question 11

(Table: Production Possibilities for Italy and Belgium)According to the table on Production Possibilities for Italy andBelgium, Italy and Belgium both could benefit if Italy were tospecialize in:

Accepted Answer

A) neither good, and Belgium were to specialize in both goods. 
B) both goods, and Belgium were to specialize in neither good. 
C) pasta, and Belgium were to specialize in linen.(True Answer )Correct 
D) linen, and Belgium were to specialize in pasta. 
A) neither good, and Belgium were to specialize in both goods. 
B) both goods, and Belgium were to specialize in neither good. 
C) pasta, and Belgium were to specialize in linen.(True Answer )Correct 
D) linen, and Belgium were to specialize in pasta.

Question 12

Although trade increases productivity, it decreases society'scollective knowledge because each person specializes in a verylimited number of things.

Accepted Answer

A) True 
 B)False

Question 13

In a world with trade, no one can afford to specialize.

Accepted Answer

A) True 
 B)False

Question 14

The slope of the production possibilities frontier at a pointindicates ________.

Accepted Answer

A) the preferences of a country 
B) a country's total gains from trade 
C) a country's opportunity cost of production (True Answer )Correct 
D) a country's trade balance 
A) the preferences of a country 
B) a country's total gains from trade 
C) a country's opportunity cost of production (True Answer )Correct 
D) a country's trade balance

Question 15

Which of the following is NOT a commonly recognized benefitof trade?

Accepted Answer

A) Trade makes people better off when preferences differ. 
B) Trade creates the need for institutions such as the World Trade Organization. 
C) Trade increases productivity through specialization and the division of knowledge. 
D) Trade increases productivity through comparative advantage. 
A) Trade makes people better off when preferences differ. 
B) Trade creates the need for institutions such as the World Trade Organization. 
C) Trade increases productivity through specialization and the division of knowledge. 
D) Trade increases productivity through comparative advantage.

Question 16

The production possibilities frontier has a negative slope andillustrates the notion of trade-offs: As more units of one goodare produced, fewer resources are left to produce the othergood.

Accepted Answer

A) True 
 B)False

Question 17

(Table: Production Possibilities for the United States and Mexico)According to the table on Production Possibilities for the United Statesand Mexico, the United States has an absolute advantage in ________ anda comparative advantage in _________.

Accepted Answer

A) both goods; corn 
B) both goods; potatoes 
C) potatoes; corn 
D) nothing; potatoes 
A) both goods; corn 
B) both goods; potatoes 
C) potatoes; corn 
D) nothing; potatoes

Question 18

Specializing in one's comparative advantage and trading withothers will make individuals better off, but may not makecountries better off.

Accepted Answer

A) True 
 B)False

Question 19

(Table: Production Possibilities for Kenya and Sri Lanka)According to the table on Production Possibilities for Kenyaand Sri Lanka, Kenya should produce ________ and Sri Lankashould 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 20

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.

Exam 2: Choice in a World of Scarcity

(Table: iPhone and iPod Production) According to the table oniPhone and iPod Production, which of the following is TRUE?

Which of the following is NOT a reason trade increases wealth?

Suppose France can produce four phones or three computerswith one unit of labor, and Sweden can produce one phone ortwo computers with one unit of labor. If France can trade onlywith Sweden, then the theory of comparative advantagesuggests that:

The trade networks of the Roman Empire:

Which of the following statements is TRUE?

Which statement best describes why people choose tospecialize?

(Table: Production Possibilities for Italy and Belgium)According to the table on Production Possibilities for Italy andBelgium, the opportunity cost of 1 pound of linen for Belgiumis:

In Spain it takes 10 workers to produce one barrel of wine andfour workers to produce one yard of cloth. Thus, theopportunity cost of producing one barrel of wine is 2.5 yards ofcloth.

Everyone, from the most to the least skilled to the most andleast educated, can benefit from trade.

U.S. pharmaceutical companies sell drugs to Kenya, andKenyan farmers sell flowers to the U.S. This pattern of tradesuggests that the U.S. is the low-opportunity-cost producer ofdrugs and Kenya is the low-opportunity-cost producer offlowers.

(Table: Production Possibilities for Italy and Belgium)According to the table on Production Possibilities for Italy andBelgium, Italy and Belgium both could benefit if Italy were tospecialize in:

Although trade increases productivity, it decreases society'scollective knowledge because each person specializes in a verylimited number of things.

In a world with trade, no one can afford to specialize.

The slope of the production possibilities frontier at a pointindicates ________.

Which of the following is NOT a commonly recognized benefitof trade?

The production possibilities frontier has a negative slope andillustrates the notion of trade-offs: As more units of one goodare produced, fewer resources are left to produce the othergood.

(Table: Production Possibilities for the United States and Mexico)According to the table on Production Possibilities for the United Statesand Mexico, the United States has an absolute advantage in ________ anda comparative advantage in _________.

Specializing in one's comparative advantage and trading withothers will make individuals better off, but may not makecountries better off.

(Table: Production Possibilities for Kenya and Sri Lanka)According to the table on Production Possibilities for Kenyaand Sri Lanka, Kenya should produce ________ and Sri Lankashould produce __________.

Trade creates value because:

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Filters

(Table: Production Possibilities for the United States and Mexico)According to the table on Production Possibilities for the United Statesand Mexico, the United States has an absolute advantage in anda comparative advantage in _.

(Table: Production Possibilities for Kenya and Sri Lanka)According to the table on Production Possibilities for Kenyaand Sri Lanka, Kenya should produce and Sri Lankashould produce __.