Question 1

The reason most people provide you with goods and services is because:

Accepted Answer

A) their beliefs make them feel charitable to you 
B) they want to be your friend 
C) they will receive something they want in return 
D) they aren't as good at bargaining as you are 
A) their beliefs make them feel charitable to you 
B) they want to be your friend 
C) they will receive something they want in return 
D) they aren't as good at bargaining as you are

Question 2

It takes Andy eight hours (including his lunch break) to write a report for the minister or three hours to take his cat to the vet.His opportunity cost of taking his cat to the vet is 2.7 hours.

Accepted Answer

A) True 
 B)False

Question 3

If trade is not possible, then each person's production possibility frontier is the same as each person's consumption possibility frontier.

Accepted Answer

A) True 
 B)False

Question 4

Table 3-2
 $\begin{array}{|c|c|c|c|c|}\hline&\text { Labour hours needed to produce one unit of: }&&\text { Amount produced in } 60 \text { hours: }\
\hline & \text { Butter (kg) } & \text { Butter (kg } & \text { Rice (kg) } & \text { Rice (kg) } \
\hline \text { Lee } & 6 & 10 & 15 & 4 \
\hline \text { John } & 3 & 20 & 15 & 4\\hline
\end{array}$
-Refer to Table 3-2.The opportunity cost of 1 kg of butter for John is:

Accepted Answer

A) 3/2 kg of rice 
B) 4/3 kg of rice 
C) 3/4 kg of rice 
D) 2/3 kg of rice 
A) 3/2 kg of rice 
B) 4/3 kg of rice 
C) 3/4 kg of rice 
D) 2/3 kg of rice

Question 5

Keith is an Economics lecturer.He is extremely competent.And the students love his PowerPoint slideshows.He is one of the more creative designers of PowerPoints in the department.Using the appropriate language, what should Keith focus his energies on prior to a lecture?

Accepted Answer

It will pay for Keith to do his own Powe

Question 6

Table 3-4
 $\begin{array}{|l|c|c|c|c|}\hline&\text { Labour hours needed to make one unit of: }&&\text { Amount Produced in } 40 \text { hours: }\
\hline & \text { Cheese } & \text { Bread } & \text { Cheese } & \text { Bread } \
\hline \text { England } & 3 & 2 & 13.3 & 20 \
\hline \text { Spain } & 1 & 5 & 40 & 8 \
\hline
\end{array}$
-Refer to Table 3-4.The fact of England imposing a tariff on cheese imports would be:

Accepted Answer

A) protecting the English cheese industry from international competition 
B) encouraging England to specialise in and export cheese 
C) allowing a greater production of dairy products in England 
D) a policy intended to harm the Spanish cheese industry 
A) protecting the English cheese industry from international competition 
B) encouraging England to specialise in and export cheese 
C) allowing a greater production of dairy products in England 
D) a policy intended to harm the Spanish cheese industry

Question 7

Andy is the greatest ukulele player in the world, but he also has a job as a highly paid executive in a human resources firm.He should quit his job to play ukulele full time.

Accepted Answer

A) True 
 B)False

Question 8

The principle of absolute advantage explains the gains from trade and why economic interdependence occurs.

Accepted Answer

A) True 
 B)False

Question 9

Table 3-4
 $\begin{array}{|l|c|c|c|c|}\hline&\text { Labour hours needed to make one unit of: }&&\text { Amount Produced in } 40 \text { hours: }\
\hline & \text { Cheese } & \text { Bread } & \text { Cheese } & \text { Bread } \
\hline \text { England } & 3 & 2 & 13.3 & 20 \
\hline \text { Spain } & 1 & 5 & 40 & 8 \
\hline
\end{array}$
-According to Table 3-4, England and Spain could benefit by specialising in _____ respectively:

Accepted Answer

A) bread and cheese 
B) cheese and bread 
C) both goods and neither goods 
D) neither goods and both goods 
A) bread and cheese 
B) cheese and bread 
C) both goods and neither goods 
D) neither goods and both goods

Question 10

If capital in China is less productive than capital in Australia in agricultural production:

Accepted Answer

A) neither nation can benefit from trade 
B) only China can benefit from trade in agricultural goods 
C) only Australia can benefit from trade in agricultural goods 
D) both nations can benefit from increased trade in agricultural goods 
A) neither nation can benefit from trade 
B) only China can benefit from trade in agricultural goods 
C) only Australia can benefit from trade in agricultural goods 
D) both nations can benefit from increased trade in agricultural goods

Question 11

Table 3-1
 $\begin{array}{|l|c|c|c|c|}\hline&\text { Labour hours needed to make } 1 \mathrm{~kg} \text { of: }&&\text { Kgs produced in } 20 \text { hours: }\
\hline & \text { Meat } & \text { Potatoes } & \text { Meat } & \text { Potatoes } \
\hline \text { Potato farmer } & 10 & 5 & 2 & 4 \
\hline \text { Zattle farmer } & 4 & 1 & 5 & 20 \
\hline
\end{array}$
-Refer to Table 3-1.For the potato farmer, the opportunity cost of 1 kg of meat is:

Accepted Answer

A) eight hours of labour 
B) four hours of labour 
C) 2 kg of potatoes 
D) 1/2 kg of potatoes 
A) eight hours of labour 
B) four hours of labour 
C) 2 kg of potatoes 
D) 1/2 kg of potatoes

Question 12

Adam Smith:

Accepted Answer

A) was one of the first scholars to write about the principle of comparative advantage 
B) wrote in the 18th century about the benefits available from trade 
C) inspired David Ricardo 
D) all of the above are true 
A) was one of the first scholars to write about the principle of comparative advantage 
B) wrote in the 18th century about the benefits available from trade 
C) inspired David Ricardo 
D) all of the above are true

Question 13

Trade is likely to:

Accepted Answer

A) lead to self-sustaining countries 
B) reduce the quantity of goods available in the economy 
C) allow each country to do what they are better at, than other countries 
D) lead to goods being produced at a lower quality 
A) lead to self-sustaining countries 
B) reduce the quantity of goods available in the economy 
C) allow each country to do what they are better at, than other countries 
D) lead to goods being produced at a lower quality

Question 14

Graph 3-2   These figures illustrate the production possibilities available to Amy and Jim with 8 hours of labour.
-Refer to Graph 3-2.The opportunity cost of one coffee for Jim is:

Accepted Answer

A) three doughnuts 
B) two doughnuts 
C) 1/2 doughnut 
D) 1/3 doughnut 
A) three doughnuts 
B) two doughnuts 
C) 1/2 doughnut 
D) 1/3 doughnut

Question 15

Comparative advantage is based on:

Accepted Answer

A) capital costs 
B) labour costs 
C) dollar price 
D) opportunity costs 
A) capital costs 
B) labour costs 
C) dollar price 
D) opportunity costs

Question 16

Graph 3-1
 
These figures illustrate the production possibilities frontiers for Robinson Crusoe and Friday with 12 hours of labour.
-Refer to Graph 3-1.For Friday, the opportunity cost of 1 kg of coconuts is:

Accepted Answer

A) 2/3 kg of fish 
B) 3 kg of fish 
C) 1 kg of fish 
D) 2 kg of fish 
A) 2/3 kg of fish 
B) 3 kg of fish 
C) 1 kg of fish 
D) 2 kg of fish

Question 17

Graph 3-2   These figures illustrate the production possibilities available to Amy and Jim with 8 hours of labour.
-According to Graph 3-2:

Accepted Answer

A) Amy has a comparative advantage in doughnuts, and Jim has an absolute advantage in coffee 
B) Amy has a comparative advantage in doughnuts, and Jim has an absolute advantage in neither goods 
C) Amy has a comparative advantage in coffee, and Jim has an absolute advantage in doughnuts 
D) Amy has a comparative advantage in coffee, and Jim has an absolute advantage in neither goods 
A) Amy has a comparative advantage in doughnuts, and Jim has an absolute advantage in coffee 
B) Amy has a comparative advantage in doughnuts, and Jim has an absolute advantage in neither goods 
C) Amy has a comparative advantage in coffee, and Jim has an absolute advantage in doughnuts 
D) Amy has a comparative advantage in coffee, and Jim has an absolute advantage in neither goods

Question 18

Imports arise because:

Accepted Answer

A) the importing country can produce the good more cheaply than the exporting country 
B) the exporting country can produce the good at a higher cost than the importing country 
C) the importing country can produce the good at an equal cost to the exporting country 
D) the exporting country can produce the good more cheaply than the importing country 
A) the importing country can produce the good more cheaply than the exporting country 
B) the exporting country can produce the good at a higher cost than the importing country 
C) the importing country can produce the good at an equal cost to the exporting country 
D) the exporting country can produce the good more cheaply than the importing country

Question 19

Graph 3-2   These figures illustrate the production possibilities available to Amy and Jim with 8 hours of labour.
-According to Graph 3-2, if Amy and Jim both specialise in the good in which they have a comparative advantage, total consumption of coffee and total consumption of doughnuts will be _____ respectively.

Accepted Answer

A) 20 and 4 
B) 4 and 20 
C) 16 and 7 
D) 7 and 16 
A) 20 and 4 
B) 4 and 20 
C) 16 and 7 
D) 7 and 16

Question 20

The principle of comparative advantage was developed in Adam Smith's 1817 book Principles of Political Economy and Taxation.

Accepted Answer

A) True 
 B)False

Exam 3: Interdependence and the Gains From Trade

The reason most people provide you with goods and services is because:

It takes Andy eight hours (including his lunch break) to write a report for the minister or three hours to take his cat to the vet.His opportunity cost of taking his cat to the vet is 2.7 hours.

If trade is not possible, then each person's production possibility frontier is the same as each person's consumption possibility frontier.

Table 3-2 Labour hours needed to produce one unit of: Amount produced in 60 hours: Butter (kg) Butter (kg Rice (kg) Rice (kg) Lee 6 10 15 4 John 3 20 15 4 -Refer to Table 3-2.The opportunity cost of 1 kg of butter for John is:

Keith is an Economics lecturer.He is extremely competent.And the students love his PowerPoint slideshows.He is one of the more creative designers of PowerPoints in the department.Using the appropriate language, what should Keith focus his energies on prior to a lecture?

Table 3-4 Labour hours needed to make one unit of: Amount Produced in 40 hours: Cheese Bread Cheese Bread England 3 2 13.3 20 Spain 1 5 40 8 -Refer to Table 3-4.The fact of England imposing a tariff on cheese imports would be:

Andy is the greatest ukulele player in the world, but he also has a job as a highly paid executive in a human resources firm.He should quit his job to play ukulele full time.

The principle of absolute advantage explains the gains from trade and why economic interdependence occurs.

Table 3-4 Labour hours needed to make one unit of: Amount Produced in 40 hours: Cheese Bread Cheese Bread England 3 2 13.3 20 Spain 1 5 40 8 -According to Table 3-4, England and Spain could benefit by specialising in _____ respectively:

If capital in China is less productive than capital in Australia in agricultural production:

Table 3-1 Labour hours needed to make 1 of: Kgs produced in 20 hours: Meat Potatoes Meat Potatoes Potato farmer 10 5 2 4 Zattle farmer 4 1 5 20 -Refer to Table 3-1.For the potato farmer, the opportunity cost of 1 kg of meat is:

Adam Smith:

Trade is likely to:

Graph 3-2 These figures illustrate the production possibilities available to Amy and Jim with 8 hours of labour. -Refer to Graph 3-2.The opportunity cost of one coffee for Jim is:

Comparative advantage is based on:

Graph 3-1 These figures illustrate the production possibilities frontiers for Robinson Crusoe and Friday with 12 hours of labour. -Refer to Graph 3-1.For Friday, the opportunity cost of 1 kg of coconuts is:

Graph 3-2 These figures illustrate the production possibilities available to Amy and Jim with 8 hours of labour. -According to Graph 3-2:

Imports arise because:

The principle of comparative advantage was developed in Adam Smith's 1817 book Principles of Political Economy and Taxation.

Ten Lessons From Economics

Thinking Like an Economist

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand and Government Policies

Consumers, Producers and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Business Strategy and Oligopoly

Competition Policy

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Global Financial Crisis of 2008 and Beyond

Five Debates Over Macroeconomic Policy

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