Question 1

The opportunity cost of an item is

Accepted Answer

A) the number of hours that one must work in order to buy one unit of the item. 
B) what you give up to get that item. 
C) always less than the dollar value of the item. 
D) always greater than the cost of producing the item. 
A) the number of hours that one must work in order to buy one unit of the item. 
B) what you give up to get that item. 
C) always less than the dollar value of the item. 
D) always greater than the cost of producing the item.

Question 2

The principle of comparative advantage does not provide answers to certain questions.One of those questions is as follows:

Accepted Answer

A) Do specialization and trade benefit more than one party to a trade? 
B) Is it absolute advantage or comparative advantage that really matters? 
C) How are the gains from trade shared among the parties to a trade? 
D) Is it possible for specialization and trade to increase total output of traded goods? 
A) Do specialization and trade benefit more than one party to a trade? 
B) Is it absolute advantage or comparative advantage that really matters? 
C) How are the gains from trade shared among the parties to a trade? 
D) Is it possible for specialization and trade to increase total output of traded goods?

Question 3

By definition,imports are

Accepted Answer

A) people who work in foreign countries. 
B) goods in which a country has an absolute advantage. 
C) whatever is given up to obtain some item. 
D) goods produced abroad and sold domestically. 
A) people who work in foreign countries. 
B) goods in which a country has an absolute advantage. 
C) whatever is given up to obtain some item. 
D) goods produced abroad and sold domestically.

Question 4

Table 3-1
  
-Refer to Table 3-1.The farmer has an absolute advantage in

Accepted Answer

A) potatoes, and the rancher has a comparative advantage in meat. 
B) meat, and the rancher has a comparative advantage in potatoes. 
C) neither good, and the rancher has a comparative advantage in potatoes. 
D) neither good, and the rancher has a comparative advantage in meat. 
A) potatoes, and the rancher has a comparative advantage in meat. 
B) meat, and the rancher has a comparative advantage in potatoes. 
C) neither good, and the rancher has a comparative advantage in potatoes. 
D) neither good, and the rancher has a comparative advantage in meat.

Question 5

For the following question(s), use the accompanying table.
Table 3-2
  
-Refer to Table 3-2.We could use the information in the table to draw a production possibilities frontier for Helen and a second production possibilities frontier for Carolyn.If we were to do this,measuring quilts along the horizontal axis,then

Accepted Answer

A) the slope of Helen's production possibilities frontier would be -0.2 and the slope of Carolyn's production possibilities frontier would be -0.5. 
B) the slope of Helen's production possibilities frontier would be -5 and the slope of Carolyn's production possibilities frontier would be -2. 
C) the slope of Helen's production possibilities frontier would be 0.2 and the slope of Carolyn's production possibilities frontier would be 0.5. 
D) the slope of Helen's production possibilities frontier would be 5 and the slope of Carolyn's production possibilities frontier would be 2. 
A) the slope of Helen's production possibilities frontier would be -0.2 and the slope of Carolyn's production possibilities frontier would be -0.5. 
B) the slope of Helen's production possibilities frontier would be -5 and the slope of Carolyn's production possibilities frontier would be -2. 
C) the slope of Helen's production possibilities frontier would be 0.2 and the slope of Carolyn's production possibilities frontier would be 0.5. 
D) the slope of Helen's production possibilities frontier would be 5 and the slope of Carolyn's production possibilities frontier would be 2.

Question 6

If Korea is capable of producing either shoes or soccer balls or some combination of those two products,then

Accepted Answer

A) Korea should specialize in the product in which it has an absolute advantage. 
B) it would be impossible for Korea to have an absolute advantage over another country in both products. 
C) it would be difficult for Korea to benefit from trade with another country if Korea is efficient in the production of both goods. 
D) Korea's opportunity cost of shoes is the inverse of its opportunity cost of soccer balls. 
A) Korea should specialize in the product in which it has an absolute advantage. 
B) it would be impossible for Korea to have an absolute advantage over another country in both products. 
C) it would be difficult for Korea to benefit from trade with another country if Korea is efficient in the production of both goods. 
D) Korea's opportunity cost of shoes is the inverse of its opportunity cost of soccer balls.

Question 7

Figure 3-1
  
-Refer to Figure 3-1.Assume both Paul and Cliff divide their time equally between the production of corn and wheat,and they do not trade.If they are the only producers of wheat and corn,then total production of wheat and corn is

Accepted Answer

A) 8 bushels of wheat and 7 bushels of corn. 
B) 7 bushels of wheat and 6 bushels of corn. 
C) 6 bushels of wheat and 8 bushels of corn. 
D) 7 bushels of wheat and 7 bushels of corn. 
A) 8 bushels of wheat and 7 bushels of corn. 
B) 7 bushels of wheat and 6 bushels of corn. 
C) 6 bushels of wheat and 8 bushels of corn. 
D) 7 bushels of wheat and 7 bushels of corn.

Question 8

Figure 3-3
  
-Refer to Figure 3-3.The opportunity cost of 1 pair of ballet slippers for Ginger is

Accepted Answer

A) 1/4 pair of tap shoes. 
B) 1/3 pair of tap shoes. 
C) 3/4 pair of tap shoes. 
D) 4/3 pairs of tap shoes. 
A) 1/4 pair of tap shoes. 
B) 1/3 pair of tap shoes. 
C) 3/4 pair of tap shoes. 
D) 4/3 pairs of tap shoes.

Question 9

The difference between production possibilities frontiers that are bowed out and those that are straight lines is that

Accepted Answer

A) bowed-out production possibilities frontiers apply to economies that face tradeoffs, whereas straight-line production possibilities frontiers apply to economies that do not face tradeoffs. 
B) bowed-out production possibilities frontiers apply to economies in which resources are not specialized, whereas straight-line production possibilities frontiers apply to economies in which resources are specialized. 
C) bowed-out production possibilities frontiers illustrate increasing opportunity cost, whereas straight-line production possibilities frontiers illustrate constant opportunity cost. 
D) straight-line production possibilities frontiers illustrate real-world conditions, whereas bowed-out production possibilities frontiers illustrate more simplistic assumptions. 
A) bowed-out production possibilities frontiers apply to economies that face tradeoffs, whereas straight-line production possibilities frontiers apply to economies that do not face tradeoffs. 
B) bowed-out production possibilities frontiers apply to economies in which resources are not specialized, whereas straight-line production possibilities frontiers apply to economies in which resources are specialized. 
C) bowed-out production possibilities frontiers illustrate increasing opportunity cost, whereas straight-line production possibilities frontiers illustrate constant opportunity cost. 
D) straight-line production possibilities frontiers illustrate real-world conditions, whereas bowed-out production possibilities frontiers illustrate more simplistic assumptions.

Question 10

Table 3-1
  
-Refer to Table 3-1.The opportunity cost of 1 pound of potatoes for the farmer is

Accepted Answer

A) 8 hours of labor. 
B) 2 hours of labor. 
C) 4 pounds of meat. 
D) 1/4 pound of meat. 
A) 8 hours of labor. 
B) 2 hours of labor. 
C) 4 pounds of meat. 
D) 1/4 pound of meat.

Question 11

Table 3-1
  
-Refer to Table 3-1.The rancher has a comparative advantage in

Accepted Answer

A) neither good, and the farmer has a comparative advantage in both goods. 
B) both goods, and the farmer has a comparative advantage in neither good. 
C) potatoes, and the farmer has a comparative advantage in meat. 
D) meat, and the farmer has a comparative advantage in potatoes. 
A) neither good, and the farmer has a comparative advantage in both goods. 
B) both goods, and the farmer has a comparative advantage in neither good. 
C) potatoes, and the farmer has a comparative advantage in meat. 
D) meat, and the farmer has a comparative advantage in potatoes.

Question 12

As long as two people have different opportunity costs,each can gain from trade,since trade allows each person to obtain a good at a price lower than his or her opportunity cost.

Accepted Answer

A) True 
 B)False

Question 13

Suppose that the country of Xenophobia chose to isolate itself from the rest of the world.Its ruler proclaimed that Xenophobia should become self-sufficient,so it would not engage in foreign trade.From an economic perspective,this idea would

Accepted Answer

A) make sense if Xenophobia had an absolute advantage in all goods. 
B) make sense if Xenophobia had no absolute advantages in any good. 
C) not make sense as long as Xenophobia had a comparative advantage in some good. 
D) not make sense as long as Xenophobia had an absolute advantage in at least half the goods that could be traded. 
A) make sense if Xenophobia had an absolute advantage in all goods. 
B) make sense if Xenophobia had no absolute advantages in any good. 
C) not make sense as long as Xenophobia had a comparative advantage in some good. 
D) not make sense as long as Xenophobia had an absolute advantage in at least half the goods that could be traded.

Question 14

Suppose that a worker in Boatland can produce either 5 units of wheat or 25 units of fish per year,and a worker in Farmland can produce either 25 units of wheat or 5 units of fish per year.There are 30 workers in each country.No trade occurs between the two countries.Boatland produces and consumes 75 units of wheat and 375 units of fish per year while Farmland produces and consumes 375 units of wheat and 75 units of fish per year.If trade were to occur,Boatland would trade 90 units of fish to Farmland in exchange for 80 units of wheat.If Boatland now completely specializes in fish production,how many units of fish could it now consume along with the 80 units of imported wheat?

Accepted Answer

A) 490 units 
B) 500 units 
C) 610 units 
D) 660 units 
A) 490 units 
B) 500 units 
C) 610 units 
D) 660 units

Question 15

Figure 3-3
  
-Refer to Figure 3-3.Suppose Fred specializes in the good in which he has a comparative advantage,and Ginger specializes in the good in which she has a comparative advantage.Then

Accepted Answer

A) total production of ballet slippers would be 6 and total production of tap shoes would be 6. 
B) total production of ballet slippers would be 8 and total production of tap shoes would be 6. 
C) total production of ballet slippers would be 8 and total production of tap shoes would be 8. 
D) total production of ballet slippers would be 8 and total production of tap shoes would be 10. 
A) total production of ballet slippers would be 6 and total production of tap shoes would be 6. 
B) total production of ballet slippers would be 8 and total production of tap shoes would be 6. 
C) total production of ballet slippers would be 8 and total production of tap shoes would be 8. 
D) total production of ballet slippers would be 8 and total production of tap shoes would be 10.

Question 16

A good that is produced abroad and sold domestically is called

Accepted Answer

A) a quota. 
B) a tariff. 
C) an import. 
D) an export. 
A) a quota. 
B) a tariff. 
C) an import. 
D) an export.

Question 17

Goods produced abroad and sold domestically are called exports and goods produced domestically and sold abroad are called imports.

Accepted Answer

A) True 
 B)False

Exam 3: Interdependence and the Gains From Trade

The opportunity cost of an item is

The principle of comparative advantage does not provide answers to certain questions.One of those questions is as follows:

By definition,imports are

Table 3-1 -Refer to Table 3-1.The farmer has an absolute advantage in

If Korea is capable of producing either shoes or soccer balls or some combination of those two products,then

Figure 3-1 -Refer to Figure 3-1.Assume both Paul and Cliff divide their time equally between the production of corn and wheat,and they do not trade.If they are the only producers of wheat and corn,then total production of wheat and corn is

Figure 3-3 -Refer to Figure 3-3.The opportunity cost of 1 pair of ballet slippers for Ginger is

The difference between production possibilities frontiers that are bowed out and those that are straight lines is that

Table 3-1 -Refer to Table 3-1.The opportunity cost of 1 pound of potatoes for the farmer is

Table 3-1 -Refer to Table 3-1.The rancher has a comparative advantage in

As long as two people have different opportunity costs,each can gain from trade,since trade allows each person to obtain a good at a price lower than his or her opportunity cost.

Suppose that the country of Xenophobia chose to isolate itself from the rest of the world.Its ruler proclaimed that Xenophobia should become self-sufficient,so it would not engage in foreign trade.From an economic perspective,this idea would

Figure 3-3 -Refer to Figure 3-3.Suppose Fred specializes in the good in which he has a comparative advantage,and Ginger specializes in the good in which she has a comparative advantage.Then

A good that is produced abroad and sold domestically is called

Goods produced abroad and sold domestically are called exports and goods produced domestically and sold abroad are called imports.

Ten Principles of Economics

Thinking Like an Economist

The Market Forces of Supply and Demand

Elasticity and Its Applications

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

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality 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 Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

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

Five Debates Over Macroeconomic Policy

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