Question 1

Points outside the production possibilities frontier are attainable but inefficient.

Accepted Answer

A) True 
 B)False

Question 2

If a nation has a comparative advantage in the production of a good it

Accepted Answer

A)  can produce that good at a lower opportunity cost than its trading partner. 
B)  can benefit by restricting imports of that good. 
C)  can produce that good using fewer resources than its trading partner. 
D)  must be the only country with the ability to produce that good. 
A)  can produce that good at a lower opportunity cost than its trading partner. 
B)  can benefit by restricting imports of that good. 
C)  can produce that good using fewer resources than its trading partner. 
D)  must be the only country with the ability to produce that good.

Question 3

Which of the following statements about a tariff is true?

Accepted Answer

A)  A tariff increases producer surplus, decreases consumer surplus, increases revenue to the government, and increases total surplus. 
B)  A tariff increases consumer surplus, decreases producer surplus, increases revenue to the government, and reduces total surplus. 
C)  A tariff increases producer surplus, decreases consumer surplus, increases revenue to the government, and reduces total surplus. 
D)  A tariff increases consumer surplus, decreases producer surplus, increases revenue to the government, and increases total surplus. 
A)  A tariff increases producer surplus, decreases consumer surplus, increases revenue to the government, and increases total surplus. 
B)  A tariff increases consumer surplus, decreases producer surplus, increases revenue to the government, and reduces total surplus. 
C)  A tariff increases producer surplus, decreases consumer surplus, increases revenue to the government, and reduces total surplus. 
D)  A tariff increases consumer surplus, decreases producer surplus, increases revenue to the government, and increases total surplus.

Question 4

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

Accepted Answer

A)  1/4 of a ring. 
B)  3 rings. 
C)  4 rings. 
D)  12 rings. 
E)  1/3 of a ring. 
A)  1/4 of a ring. 
B)  3 rings. 
C)  4 rings. 
D)  12 rings. 
E)  1/3 of a ring.

Question 5

How does an import quota differ from an equivalent tariff?

Accepted Answer

Both the import quota and the tariff rai

Question 6

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. Which of the following statements about absolute advantage is true?

Accepted Answer

A)  South Africa has an absolute advantage in the production of food while Namibia has an absolute advantage in the production of electronics. 
B)  Namibia has an absolute advantage in the production of food while South Africa has an absolute advantage in the production of electronics. 
C)  South Africa has an absolute advantage in the production of both food and electronics. 
D)  Namibia has an absolute advantage in the production of both food and electronics. 
A)  South Africa has an absolute advantage in the production of food while Namibia has an absolute advantage in the production of electronics. 
B)  Namibia has an absolute advantage in the production of food while South Africa has an absolute advantage in the production of electronics. 
C)  South Africa has an absolute advantage in the production of both food and electronics. 
D)  Namibia has an absolute advantage in the production of both food and electronics.

Question 7

Which of the following statements about trade is true?

Accepted Answer

A)  Unrestricted international trade benefits every person in a country equally. 
B)  Trade can benefit everyone in society because it allows people to specialise in activities in which they have a comparative advantage. 
C)  People that are skilled at all activities cannot benefit from trade because they do not have an opportunity cost in production. 
D)  Trade can benefit everyone in society because it allows people to specialise in activities in which they have an absolute advantage. 
A)  Unrestricted international trade benefits every person in a country equally. 
B)  Trade can benefit everyone in society because it allows people to specialise in activities in which they have a comparative advantage. 
C)  People that are skilled at all activities cannot benefit from trade because they do not have an opportunity cost in production. 
D)  Trade can benefit everyone in society because it allows people to specialise in activities in which they have an absolute advantage.

Question 8

What are the arguments in favour of trade restrictions, and what are the counterarguments? According to most economists, do any of these arguments really justify trade restrictions? Explain.

Accepted Answer

Arguments include jobs, national securit

Question 9

Exhibit 1
  
-Refer to Exhibit 1. As we move from point A to point D,

Accepted Answer

A)  the opportunity cost of buns in terms of biscuits falls. 
B)  the opportunity cost of buns in terms of biscuits rises. 
C)  the opportunity cost of buns in terms of biscuits is constant. 
D)  the economy becomes less efficient. 
E)  the economy becomes more efficient. 
A)  the opportunity cost of buns in terms of biscuits falls. 
B)  the opportunity cost of buns in terms of biscuits rises. 
C)  the opportunity cost of buns in terms of biscuits is constant. 
D)  the economy becomes less efficient. 
E)  the economy becomes more efficient.

Question 10

Comparative advantage is a comparison based on opportunity cost.

Accepted Answer

A) True 
 B)False

Question 11

Suppose the world consists of two countries: Germany and Spain. Further, suppose there are only two goods, food and clothing. Which of the following statements is true?

Accepted Answer

A)  If Germany has an absolute advantage in the production of food, then Spain must have an absolute advantage in the production of clothing. 
B)  None of these answers. 
C)  If Germany has a comparative advantage in the production of food, Spain might also have a comparative advantage in the production of food. 
D)  If Germany has a comparative advantage in the production of food, it must also have a comparative advantage in the production of clothing. 
E)  If Germany has a comparative advantage in the production of food, then Spain must have a comparative advantage in the production of clothing. 
A)  If Germany has an absolute advantage in the production of food, then Spain must have an absolute advantage in the production of clothing. 
B)  None of these answers. 
C)  If Germany has a comparative advantage in the production of food, Spain might also have a comparative advantage in the production of food. 
D)  If Germany has a comparative advantage in the production of food, it must also have a comparative advantage in the production of clothing. 
E)  If Germany has a comparative advantage in the production of food, then Spain must have a comparative advantage in the production of clothing.

Question 12

Julia can fix a meal in 1 hour, and her opportunity cost of one hour is R50. Jacques can fix the same kind of meal in 2 hours, and his opportunity cost of one hour is R20. Will both Julia and Jacques be better off if she pays him R45 per meal to fix her meals? Explain.

Accepted Answer

Since Julia's opportunity cost

Question 13

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. Namibia should

Accepted Answer

A)  specialise in electronics production, export electronics, and import food. 
B)  produce neither good because it has an absolute disadvantage in the production of both goods. 
C)  produce both goods because neither country has a comparative advantage. 
D)  specialise in food production, export food, and import electronics. 
A)  specialise in electronics production, export electronics, and import food. 
B)  produce neither good because it has an absolute disadvantage in the production of both goods. 
C)  produce both goods because neither country has a comparative advantage. 
D)  specialise in food production, export food, and import electronics.

Question 14

If trade benefits one country, its trading partner must be worse off due to trade.

Accepted Answer

A) True 
 B)False

Question 15

If a nation has an absolute advantage in the production of a good it

Accepted Answer

A)  can benefit by restricting imports of that good. 
B)  will specialise in the production of that good and export it. 
C)  can produce that good using fewer resources than its trading partner. 
D)  can produce that good at a lower opportunity cost than its trading partner. 
A)  can benefit by restricting imports of that good. 
B)  will specialise in the production of that good and export it. 
C)  can produce that good using fewer resources than its trading partner. 
D)  can produce that good at a lower opportunity cost than its trading partner.

Question 16

Which of the following is not employed as an argument in support of trade restrictions?

Accepted Answer

A)  Free trade harms the national security if vital products are imported. 
B)  Free trade is harmful to importing countries if foreign countries subsidise their exporting industries. 
C)  Free trade destroys domestic jobs. 
D)  Free trade harms both domestic producers and domestic consumers and therefore reduces total surplus. 
E)  Free trade harms infant industries in an importing country. 
A)  Free trade harms the national security if vital products are imported. 
B)  Free trade is harmful to importing countries if foreign countries subsidise their exporting industries. 
C)  Free trade destroys domestic jobs. 
D)  Free trade harms both domestic producers and domestic consumers and therefore reduces total surplus. 
E)  Free trade harms infant industries in an importing country.

Question 17

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. Prices of electronics can be stated in terms of units of food. What is the range of prices of electronics for which both countries could gain from trade? The price must be greater than:

Accepted Answer

A)  1/5 of a unit of food but less than 1/4 of a unit of food. 
B)  4 units of food but less than 5 units of food. 
C)  1/4 of a unit of food but less than 1/2 of a unit of food. 
D)  2 units of food but less than 4 units of food. 
A)  1/5 of a unit of food but less than 1/4 of a unit of food. 
B)  4 units of food but less than 5 units of food. 
C)  1/4 of a unit of food but less than 1/2 of a unit of food. 
D)  2 units of food but less than 4 units of food.

Question 18

Exhibit 2
  
-Refer to Exhibit 2. The gains from trade correspond to the

Accepted Answer

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

Question 19

Exhibit 1
  
-Refer to Exhibit 1. Point F represents a combination of production that

Accepted Answer

A)  is a more equitable output level of both biscuits and buns. 
B)  can be reached if we reduce the production of buns by 20 units. 
C)  can be reached if there is a sufficient advance in technology. 
D)  is inefficient because there are unemployed resources. 
A)  is a more equitable output level of both biscuits and buns. 
B)  can be reached if we reduce the production of buns by 20 units. 
C)  can be reached if there is a sufficient advance in technology. 
D)  is inefficient because there are unemployed resources.

Question 20

If an economy is operating on its production possibilities frontier, it must produce less of one good if it produces more of another.

Accepted Answer

A) True 
 B)False

Points outside the production possibilities frontier are attainable but inefficient.

If a nation has a comparative advantage in the production of a good it

Which of the following statements about a tariff is true?

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

How does an import quota differ from an equivalent tariff?

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. Which of the following statements about absolute advantage is true?

Which of the following statements about trade is true?

What are the arguments in favour of trade restrictions, and what are the counterarguments? According to most economists, do any of these arguments really justify trade restrictions? Explain.

Exhibit 1 -Refer to Exhibit 1. As we move from point A to point D,

Comparative advantage is a comparison based on opportunity cost.

Suppose the world consists of two countries: Germany and Spain. Further, suppose there are only two goods, food and clothing. Which of the following statements is true?

Julia can fix a meal in 1 hour, and her opportunity cost of one hour is R50. Jacques can fix the same kind of meal in 2 hours, and his opportunity cost of one hour is R20. Will both Julia and Jacques be better off if she pays him R45 per meal to fix her meals? Explain.

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. Namibia should

If trade benefits one country, its trading partner must be worse off due to trade.

If a nation has an absolute advantage in the production of a good it

Which of the following is not employed as an argument in support of trade restrictions?

Exhibit 2 -Refer to Exhibit 2. The gains from trade correspond to the

Exhibit 1 -Refer to Exhibit 1. Point F represents a combination of production that

If an economy is operating on its production possibilities frontier, it must produce less of one good if it produces more of another.

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

Points outside the production possibilities frontier are attainable but inefficient.

If a nation has a comparative advantage in the production of a good it

Which of the following statements about a tariff is true?

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

How does an import quota differ from an equivalent tariff?

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. Which of the following statements about absolute advantage is true?

Which of the following statements about trade is true?

What are the arguments in favour of trade restrictions, and what are the counterarguments? According to most economists, do any of these arguments really justify trade restrictions? Explain.

Exhibit 1 -Refer to Exhibit 1. As we move from point A to point D,

Comparative advantage is a comparison based on opportunity cost.

Suppose the world consists of two countries: Germany and Spain. Further, suppose there are only two goods, food and clothing. Which of the following statements is true?

Julia can fix a meal in 1 hour, and her opportunity cost of one hour is R50. Jacques can fix the same kind of meal in 2 hours, and his opportunity cost of one hour is R20. Will both Julia and Jacques be better off if she pays him R45 per meal to fix her meals? Explain.

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. Namibia should

If trade benefits one country, its trading partner must be worse off due to trade.

If a nation has an absolute advantage in the production of a good it

Which of the following is not employed as an argument in support of trade restrictions?

Exhibit 2 -Refer to Exhibit 2. The gains from trade correspond to the

Exhibit 1 -Refer to Exhibit 1. Point F represents a combination of production that

If an economy is operating on its production possibilities frontier, it must produce less of one good if it produces more of another.

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