Question 1

If South Africa has an absolute advantage in the production of an item, it must also have a comparative advantage in the production of that item.

Accepted Answer

A) True 
 B)False  False

Question 2

Exhibit 2
  
-Refer to Exhibit 2. If trade is not allowed, producer surplus is the

Accepted Answer

A)  Area A + B + C + D. 
B)  Area A + B + C. 
C)  Area B + C + D. 
D)  Area C. 
E)  Area B + C. 
A)  Area A + B + C + D. 
B)  Area A + B + C. 
C)  Area B + C + D. 
D)  Area C. 
E)  Area B + C. D

Question 3

Using the graph below, answer the following questions about dark chocolate slabs.
 $$\text { R22 }$$   
a. What is the equilibrium price of slabs before trade?
b. What is the equilibrium quantity of slabs before trade?
c. What is the price of slabs after trade is allowed?
d. What is the quantity of slabs imported after trade is allowed?
e. What is the amount of consumer surplus before trade?
f. What is the amount of consumer surplus after trade?
g. What is the amount of producer surplus before trade?
h. What is the amount of producer surplus after trade?
i. What is the amount of total surplus before trade?
j. What is the amount of total surplus after trade?
k. What is the change in total surplus because of trade?

Accepted Answer

a. R14
b. 90
c. R10
d. 85
e. R360
f. R810
g. R405
h. R125
i. R765
j. R935
k. R170

Question 4

The production possibilities frontier demonstrates the basic economic principle that

Accepted Answer

A)  economies are always efficient. 
B)  assuming full employment, supply will always determine demand. 
C)  assuming full employment, an economy is efficient only when the production of capital goods in a particular year is greater than the production of consumption goods in that year. 
D)  assuming full employment, to produce more of any one thing, the economy must produce less of at least one other good. 
A)  economies are always efficient. 
B)  assuming full employment, supply will always determine demand. 
C)  assuming full employment, an economy is efficient only when the production of capital goods in a particular year is greater than the production of consumption goods in that year. 
D)  assuming full employment, to produce more of any one thing, the economy must produce less of at least one other good.

Question 5

Exhibit 1
  
-Refer to Exhibit 1. If the economy is operating at point C, the opportunity cost of producing an additional 15 units of biscuits is

Accepted Answer

A)  40 units of buns. 
B)  10 units of buns. 
C)  20 units of buns. 
D)  30 units of buns. 
E)  50 units of buns. 
A)  40 units of buns. 
B)  10 units of buns. 
C)  20 units of buns. 
D)  30 units of buns. 
E)  50 units of buns.

Question 6

A tariff raises the price of a good, reduces the domestic quantity demanded, increases the domestic quantity supplied, and increases the quantity imported.

Accepted Answer

A) True 
 B)False

Question 7

Using the graph, assume that the government imposes a R1 tariff on ice cream.
 
a.	What is the domestic price and quantity demanded of ice cream after the tariff is imposed?
b.	What is the quantity of ice cream imported before the tariff?
c.	What is the quantity of ice cream imported after the tariff?
d.	What would be the amount of consumer surplus before the tariff?
e.	What would be the amount of consumer surplus after the tariff?
f.	What would be the amount of producer surplus before the tariff?
g.	What would be the amount of producer surplus after the tariff?
h.	What would be the amount of government revenue because of the tariff?
i.	What would be the total amount of deadweight loss due to the tariff?

Accepted Answer

a. R6; 84
b. 66
c. 4

Question 8

Suppose a country's workers can produce 4 watches per hour or 12 rings per hour. If there is no trade, the domestic price of 1 ring is

Accepted Answer

A)  1/4 of a watch. 
B)  3 watches. 
C)  1/3 of a watch. 
D)  12 watches. 
E)  4 watches. 
A)  1/4 of a watch. 
B)  3 watches. 
C)  1/3 of a watch. 
D)  12 watches. 
E)  4 watches.

Question 9

Exhibit 3
  
-Refer to Exhibit 3. The deadweight loss from the tariff is the

Accepted Answer

A)  Area D + F. 
B)  Area E. 
C)  Area D + E + F. 
D)  Area B + D + E + F. 
E)  Area B. 
A)  Area D + F. 
B)  Area E. 
C)  Area D + E + F. 
D)  Area B + D + E + F. 
E)  Area B.

Question 10

Suppose the world price is below the before-trade domestic price for a good. If a country allows free trade in this good,

Accepted Answer

A)  both producers and consumers will gain. 
B)  both producers and consumers will lose. 
C)  producers will gain and consumers will lose. 
D)  consumers will gain and producers will lose. 
A)  both producers and consumers will gain. 
B)  both producers and consumers will lose. 
C)  producers will gain and consumers will lose. 
D)  consumers will gain and producers will lose.

Question 11

Exhibit 3
  
-Refer to Exhibit 3. Government revenue from the tariff is the

Accepted Answer

A)  Area D + F. 
B)  Area G. 
C)  Area E. 
D)  Area D + E + F. 
E)  Area C + D + E + F. 
A)  Area D + F. 
B)  Area G. 
C)  Area E. 
D)  Area D + E + F. 
E)  Area C + D + E + F.

Question 12

Points on the production possibilities frontier are

Accepted Answer

A)  inefficient. 
B)  normative. 
C)  unattainable. 
D)  efficient. 
E)  equitable. 
A)  inefficient. 
B)  normative. 
C)  unattainable. 
D)  efficient. 
E)  equitable.

Question 13

When a country allows trade and imports a good,

Accepted Answer

A)  domestic producers are worse off, domestic consumers are better off, and the nation is worse off because the losses of the losers exceed the gains of the winners. 
B)  domestic consumers are worse off, domestic producers are better off, and the nation is worse off because the losses of the losers exceed the gains of the winners. 
C)  domestic producers are worse off, domestic consumers are better off, and the nation is better off because the gains of the winners exceed the losses of the losers. 
D)  domestic consumers are worse off, domestic producers are better off, and the nation is better off because the gains of the winners exceed the losses of the losers. 
A)  domestic producers are worse off, domestic consumers are better off, and the nation is worse off because the losses of the losers exceed the gains of the winners. 
B)  domestic consumers are worse off, domestic producers are better off, and the nation is worse off because the losses of the losers exceed the gains of the winners. 
C)  domestic producers are worse off, domestic consumers are better off, and the nation is better off because the gains of the winners exceed the losses of the losers. 
D)  domestic consumers are worse off, domestic producers are better off, and the nation is better off because the gains of the winners exceed the losses of the losers.

Question 14

If free trade is allowed, a country will export a good if the world price is

Accepted Answer

A)  above the before-trade domestic price of the good. 
B)  below the before-trade domestic price of the good. 
C)  equal to the before-trade domestic price of the good. 
D)  equal to the price elasticity of supply of the good. 
A)  above the before-trade domestic price of the good. 
B)  below the before-trade domestic price of the good. 
C)  equal to the before-trade domestic price of the good. 
D)  equal to the price elasticity of supply of the good.

Question 15

Yusuf and Lebogang must prepare a presentation for their marketing class. As part of their presentation, they must do a series of calculations and prepare 50 PowerPoint slides. It would take Yusuf 10 hours to do the required calculation and 10 hours to prepare the slides. It would take Lebogang 12 hours to do the calculations and 20 hours to prepare the slides.
a. How much time would it take the two to complete the project if they divide the calculations equally and the slides equally?
b. How much time would it take the two to complete the project if they use comparative advantage and specialise in calculating or preparing slides?
c. If Lebogang and Yusuf have the same opportunity cost of R50 per hour, is there a better solution than for each to specialise in calculating or preparing slides?

Accepted Answer

a. If both tasks are divided equally, it

Question 16

According to the principle of comparative advantage, countries

Accepted Answer

A)  should specialise in the production of goods that they enjoy consuming. 
B)  with a comparative advantage in the production of every good need not specialise. 
C)  should specialise in the production of goods for which they have a lower opportunity cost of production than their trading partners. 
D)  should specialise in the production of goods for which they use fewer resources in production than their trading partners. 
A)  should specialise in the production of goods that they enjoy consuming. 
B)  with a comparative advantage in the production of every good need not specialise. 
C)  should specialise in the production of goods for which they have a lower opportunity cost of production than their trading partners. 
D)  should specialise in the production of goods for which they use fewer resources in production than their trading partners.

Question 17

Which of the following will not shift a country's production possibilities frontier outward?

Accepted Answer

A)  An advance in technology. 
B)  An increase in the labour force. 
C)  An increase in the capital stock. 
D)  A reduction in unemployment. 
A)  An advance in technology. 
B)  An increase in the labour force. 
C)  An increase in the capital stock. 
D)  A reduction in unemployment.

Question 18

Exhibit 2
  
-Refer to Exhibit 2. If free trade is allowed, producer surplus is the

Accepted Answer

A)  Area B + C + D. 
B)  Area A + B + C. 
C)  Area B + C. 
D)  Area A + B + C + D. 
E)  Area C. 
A)  Area B + C + D. 
B)  Area A + B + C. 
C)  Area B + C. 
D)  Area A + B + C + D. 
E)  Area C.

Question 19

Table 1 shows the units of output a worker can produce per month in South Africa and Namibia.
 $$\begin{array} { | l | c | c | } 
\hline & \text { Fond } & \text { Electranics } \
\hline \text { South Africa } & 20 & 5 \
\hline \text { Narmibia } & 8 & 2 \
\hline
\end{array}$$
-Refer to Table 1. The opportunity cost of 1 unit of electronics in South Africa is

Accepted Answer

A)  4 units of food. 
B)  5 units of food. 
C)  1/5 of a unit of food. 
D)  1/4 of a unit of food. 
A)  4 units of food. 
B)  5 units of food. 
C)  1/5 of a unit of food. 
D)  1/4 of a unit of food.

Question 20

The only two countries in the world, Alpha and Omega, face the following production possibilities frontiers.
   
a. Assume that each country decides to use half of its resources in the production of each good. Show these points on the graphs for each country as point A. How much of each good would the countries produce?
b. If these countries choose not to trade, what would be the total world production of popcorn and peanuts?
c. Now suppose that each country decides to specialise in the good in which each has a comparative advantage. By specialising, what is the total world production of each product now?
d. If each country decides to trade 100 units of popcorn for 100 units of peanuts, show on the graphs the gain each country would receive from trade. Label these points B.

Accepted Answer

@#IMG-DLM& a. Alpha would be producing 125 units o

If South Africa has an absolute advantage in the production of an item, it must also have a comparative advantage in the production of that item.

Exhibit 2 -Refer to Exhibit 2. If trade is not allowed, producer surplus is the

The production possibilities frontier demonstrates the basic economic principle that

Exhibit 1 -Refer to Exhibit 1. If the economy is operating at point C, the opportunity cost of producing an additional 15 units of biscuits is

A tariff raises the price of a good, reduces the domestic quantity demanded, increases the domestic quantity supplied, and increases the quantity imported.

Suppose a country's workers can produce 4 watches per hour or 12 rings per hour. If there is no trade, the domestic price of 1 ring is

Exhibit 3 -Refer to Exhibit 3. The deadweight loss from the tariff is the

Suppose the world price is below the before-trade domestic price for a good. If a country allows free trade in this good,

Exhibit 3 -Refer to Exhibit 3. Government revenue from the tariff is the

Points on the production possibilities frontier are

When a country allows trade and imports a good,

If free trade is allowed, a country will export a good if the world price is

According to the principle of comparative advantage, countries

Which of the following will not shift a country's production possibilities frontier outward?

Exhibit 2 -Refer to Exhibit 2. If free trade is allowed, producer surplus is the

Table 1 shows the units of output a worker can produce per month in South Africa and Namibia. Fond Electranics South Africa 20 5 Narmibia 8 2 -Refer to Table 1. The opportunity cost of 1 unit of electronics in South Africa is

What Is Economics

Thinking Like an Economist

The Market Forces of Supply and Demand

Elasticity and Its Applications

Background to Demand: Consumer Choices

Background to Supply: Firms in Competitive Markets

Consumers, Producers and the Efficiency of Markets

Supply, Demand and Government Policies

The Tax System

Public Goods, Common Resources and Merit Goods

Market Failure and Externalities

Information and Behavioural Economics

Firms Production Decisions

Market Structures I: Monopoly

Market Structures Ii: Monopolistic Competition

Market Structures Iii: Oligopoly

The Economics of Factor Markets

Income Inequality and Poverty

Filters

Exam 19: Interdependence and the Gains From Trade

If South Africa has an absolute advantage in the production of an item, it must also have a comparative advantage in the production of that item.

Exhibit 2 -Refer to Exhibit 2. If trade is not allowed, producer surplus is the

The production possibilities frontier demonstrates the basic economic principle that

Exhibit 1 -Refer to Exhibit 1. If the economy is operating at point C, the opportunity cost of producing an additional 15 units of biscuits is

A tariff raises the price of a good, reduces the domestic quantity demanded, increases the domestic quantity supplied, and increases the quantity imported.

Suppose a country's workers can produce 4 watches per hour or 12 rings per hour. If there is no trade, the domestic price of 1 ring is

Exhibit 3 -Refer to Exhibit 3. The deadweight loss from the tariff is the

Suppose the world price is below the before-trade domestic price for a good. If a country allows free trade in this good,

Exhibit 3 -Refer to Exhibit 3. Government revenue from the tariff is the

Points on the production possibilities frontier are

When a country allows trade and imports a good,

If free trade is allowed, a country will export a good if the world price is

According to the principle of comparative advantage, countries

Which of the following will not shift a country's production possibilities frontier outward?

Exhibit 2 -Refer to Exhibit 2. If free trade is allowed, producer surplus is the

Table 1 shows the units of output a worker can produce per month in South Africa and Namibia. Fond Electranics South Africa 20 5 Narmibia 8 2 -Refer to Table 1. The opportunity cost of 1 unit of electronics in South Africa is

What Is Economics

Thinking Like an Economist

The Market Forces of Supply and Demand

Elasticity and Its Applications

Background to Demand: Consumer Choices

Background to Supply: Firms in Competitive Markets

Consumers, Producers and the Efficiency of Markets

Supply, Demand and Government Policies

The Tax System

Public Goods, Common Resources and Merit Goods

Market Failure and Externalities

Information and Behavioural Economics

Firms Production Decisions

Market Structures I: Monopoly

Market Structures Ii: Monopolistic Competition

Market Structures Iii: Oligopoly

The Economics of Factor Markets

Income Inequality and Poverty

Filters