Question 1

Table 3-2
  
-Refer to Table 3-2. What is the opportunity cost of 1 kilogram of potatoes for the Rancher?

Accepted Answer

A) 4 hours of labour. 
B) 5 hours of labour. 
C) 5/4 pounds of meat. 
D) 4/5 pound of meat. 
A) 4 hours of labour. 
B) 5 hours of labour. 
C) 5/4 pounds of meat. 
D) 4/5 pound of meat.

Question 2

Suppose a producer can produce a product with lower opportunity cost. Which of the following is correct?

Accepted Answer

A) The producer has a comparative advantage in the production of that good. 
B) The producer has an absolute advantage in the production of that good. 
C) The producer has both an absolute and comparative advantage in the production of that good. 
D) The producer should import that product. 
A) The producer has a comparative advantage in the production of that good. 
B) The producer has an absolute advantage in the production of that good. 
C) The producer has both an absolute and comparative advantage in the production of that good. 
D) The producer should import that product.

Question 3

What does comparative advantage reflect?

Accepted Answer

A) productivity. 
B) relative opportunity cost. 
C) efficiency. 
D) terms of trade advantage. 
A) productivity. 
B) relative opportunity cost. 
C) efficiency. 
D) terms of trade advantage.

Question 4

Table 3-6
  
-Refer to Table 3-6. If England and Spain trade based on the principle of comparative advantage, which product will England export to Spain?

Accepted Answer

A) Cheese 
B) Bread 
C) both cheese and bread 
D) England cannot benefit from trade with Spain. 
A) Cheese 
B) Bread 
C) both cheese and bread 
D) England cannot benefit from trade with Spain.

Question 5

Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 5 bushels of corn or 50 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. If the two countries do not trade, Cornland will produce and consume 400 bushels of corn and 100 bushels of oats, while Oatland will produce and consume 50 bushels of corn and 500 bushels of oats. Combined output for the two countries would therefore be 450 bushels of corn and 600 bushels of oats. If the two countries do trade, each will completely specialize in producing the crop for which it has a comparative advantage. If trade occurs, by what amount will the combined output for the two countries increase?

Accepted Answer

A) 800 bushels of corn and 1000 bushels of oats. 
B) 400 bushels of corn and 500 bushels of oats. 
C) 350 bushels of corn and 400 bushels of oats. 
D) There would not be any increase. 
A) 800 bushels of corn and 1000 bushels of oats. 
B) 400 bushels of corn and 500 bushels of oats. 
C) 350 bushels of corn and 400 bushels of oats. 
D) There would not be any increase.

Question 6

Figure 3-2    
-Refer to Figure 3-2. Which of the following is true for Cliff and Paul?

Accepted Answer

A) Paul has a comparative advantage in both wheat and corn. 
B) Paul has an absolute advantage in wheat and Cliff has a comparative advantage in corn. 
C) Cliff has a comparative advantage in wheat and Paul has a comparative advantage in corn. 
D) Cliff has a comparative advantage in both wheat and corn. 
A) Paul has a comparative advantage in both wheat and corn. 
B) Paul has an absolute advantage in wheat and Cliff has a comparative advantage in corn. 
C) Cliff has a comparative advantage in wheat and Paul has a comparative advantage in corn. 
D) Cliff has a comparative advantage in both wheat and corn.

Question 7

Currently, a farmer can either grow 40 bushels of wheat or 120 bushels of corn per acre. If he were able to trade 80 bushels of corn for 30 bushels of wheat, would he be better off or worse off?

Accepted Answer

A) Worse off because his opportunity cost of wheat would increase from 2.7 bushels of corn to 3 bushels of corn. 
B) Better off because his opportunity cost of wheat would fall from 80 bushels to 50 bushels. 
C) Better off because his opportunity cost of wheat would fall from 3 bushels of corn to 2.7 bushels. 
D) There is not enough information to answer this question. 
A) Worse off because his opportunity cost of wheat would increase from 2.7 bushels of corn to 3 bushels of corn. 
B) Better off because his opportunity cost of wheat would fall from 80 bushels to 50 bushels. 
C) Better off because his opportunity cost of wheat would fall from 3 bushels of corn to 2.7 bushels. 
D) There is not enough information to answer this question.

Question 8

Figure 3-5  
-Refer to Figure 3-5. If Fred and Ginger both specialize in the good in which they have a comparative advantage, what would the total production be?

Accepted Answer

A) 6 ballet slippers and 6 tap shoes. 
B) 8 ballet slippers and 6 tap shoes. 
C) 8 ballet slippers and 8 tap shoes. 
D) 8 ballet slippers and 10 tap shoes. 
A) 6 ballet slippers and 6 tap shoes. 
B) 8 ballet slippers and 6 tap shoes. 
C) 8 ballet slippers and 8 tap shoes. 
D) 8 ballet slippers and 10 tap shoes.

Question 9

If there is no trade, which of the following is most likely?

Accepted Answer

A) A country is better off because it will become self-sufficient. 
B) A country's production possibilities frontier is also its consumption possibilities frontier. 
C) A country can still benefit from international specialization. 
D) More product variety is available in a country. 
A) A country is better off because it will become self-sufficient. 
B) A country's production possibilities frontier is also its consumption possibilities frontier. 
C) A country can still benefit from international specialization. 
D) More product variety is available in a country.

Question 10

What is the difference between production possibilities frontiers that are bowed out and those that are linear?

Accepted Answer

A) Bowed out production possibilities frontiers illustrate tradeoffs where linear production possibilities frontiers do not. 
B) Bowed out production possibilities frontiers show increasing opportunity cost where linear ones show constant opportunity cost. 
C) Bowed out production possibilities frontiers are the result of perfectly shiftable resources where linear production possibilities frontiers are not. 
D) Linear production possibilities frontiers illustrate real world conditions more than bowed out production possibilities frontiers. 
A) Bowed out production possibilities frontiers illustrate tradeoffs where linear production possibilities frontiers do not. 
B) Bowed out production possibilities frontiers show increasing opportunity cost where linear ones show constant opportunity cost. 
C) Bowed out production possibilities frontiers are the result of perfectly shiftable resources where linear production possibilities frontiers are not. 
D) Linear production possibilities frontiers illustrate real world conditions more than bowed out production possibilities frontiers.

Question 11

Figure 3-5  
-Refer to Figure 3-5. What is the opportunity cost of 1 pair of ballet slippers for Fred?

Accepted Answer

A) 1/3 pair of tap shoes. 
B) 1/5 pair of tap shoes. 
C) 3/5 pair of tap shoes. 
D) 5/3 pairs of tap shoes. 
A) 1/3 pair of tap shoes. 
B) 1/5 pair of tap shoes. 
C) 3/5 pair of tap shoes. 
D) 5/3 pairs of tap shoes.

Question 12

What is the best reason for people to provide you with goods and services?

Accepted Answer

A) They are acting out of generosity. 
B) They are acting because they like you. 
C) They do so because they get something in return. 
D) They are required to do so by government. 
A) They are acting out of generosity. 
B) They are acting because they like you. 
C) They do so because they get something in return. 
D) They are required to do so by government.

Question 13

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.
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 specialize in the good in which each has a comparative advantage. By specializing, 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 of

Question 14

Table 3-1
  
-Refer to Table 3-1. What is the opportunity cost of 1 kg of potatoes for the Rancher?

Accepted Answer

A) 4 hours of labour. 
B) 5 hours of labour. 
C) 5/4 kg of meat. 
D) 4/5 kg of meat. 
A) 4 hours of labour. 
B) 5 hours of labour. 
C) 5/4 kg of meat. 
D) 4/5 kg of meat.

Question 15

Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 20 bushels of corn or 5 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. Which of the following statements is correct?

Accepted Answer

A) Both countries could gain from trade with each other. 
B) Neither country would gain from trade because Cornland has an absolute advantage in both goods. 
C) Neither country would gain from trade because neither one has a comparative advantage. 
D) Only Oatland could possibly gain from trade. 
A) Both countries could gain from trade with each other. 
B) Neither country would gain from trade because Cornland has an absolute advantage in both goods. 
C) Neither country would gain from trade because neither one has a comparative advantage. 
D) Only Oatland could possibly gain from trade.

Question 16

Suppose a gardener produces both green beans and corn in her garden. If the opportunity cost of one bushel of corn is 3/5 bushel of green beans, what is the opportunity cost of 1 bushel of green beans?

Accepted Answer

A) 5/3 bushels of corn. 
B) 2/5 bushel of corn. 
C) 5/2 bushels of corn. 
D) 8/5 bushels of corn. 
A) 5/3 bushels of corn. 
B) 2/5 bushel of corn. 
C) 5/2 bushels of corn. 
D) 8/5 bushels of corn.

Question 17

Figure 3-3
Ice cream is measured in kilograms.  
-Refer to Figure 3-3. Which of the following is correct?

Accepted Answer

A) Ben has an absolute advantage in cones and Jerry has a comparative advantage in ice cream. 
B) Ben has an absolute advantage in both goods and Jerry has a comparative advantage in cones. 
C) Ben has an absolute advantage in ice cream and Jerry has a comparative advantage in cones. 
D) Ben has an absolute advantage in neither good and Jerry has a comparative advantage in ice cream. 
A) Ben has an absolute advantage in cones and Jerry has a comparative advantage in ice cream. 
B) Ben has an absolute advantage in both goods and Jerry has a comparative advantage in cones. 
C) Ben has an absolute advantage in ice cream and Jerry has a comparative advantage in cones. 
D) Ben has an absolute advantage in neither good and Jerry has a comparative advantage in ice cream.

Question 18

On what is trade based?

Accepted Answer

A) absolute advantage. 
B) comparative advantage. 
C) production costs. 
D) relative dollar prices. 
A) absolute advantage. 
B) comparative advantage. 
C) production costs. 
D) relative dollar prices.

Question 19

Table 3-4
  
-Refer to Table 3-4. Which of the following is correct?

Accepted Answer

A) Alberta has a comparative advantage in baskets and Manitoba has a comparative advantage in birdhouses. 
B) Alberta has a comparative advantage in birdhouses and Manitoba has a comparative advantage in baskets. 
C) Alberta has a comparative advantage in neither good and Manitoba has a comparative advantage in both goods. 
D) Alberta has a comparative advantage in both goods and Manitoba has a comparative advantage in neither good. 
A) Alberta has a comparative advantage in baskets and Manitoba has a comparative advantage in birdhouses. 
B) Alberta has a comparative advantage in birdhouses and Manitoba has a comparative advantage in baskets. 
C) Alberta has a comparative advantage in neither good and Manitoba has a comparative advantage in both goods. 
D) Alberta has a comparative advantage in both goods and Manitoba has a comparative advantage in neither good.

Question 20

Figure 3-4    
-Refer to Figure 3-4. Which of the following is correct?

Accepted Answer

A) Ben has a comparative advantage in wine, and Jerry has an absolute advantage in both goods. 
B) Ben has a comparative advantage in beer, and Jerry has an absolute advantage in both goods. 
C) Ben has a comparative advantage in beer, and Jerry has an absolute advantage in wine. 
D) Ben has a comparative advantage in wine, and Jerry has an absolute advantage in beer. 
A) Ben has a comparative advantage in wine, and Jerry has an absolute advantage in both goods. 
B) Ben has a comparative advantage in beer, and Jerry has an absolute advantage in both goods. 
C) Ben has a comparative advantage in beer, and Jerry has an absolute advantage in wine. 
D) Ben has a comparative advantage in wine, and Jerry has an absolute advantage in beer.

Table 3-2 -Refer to Table 3-2. What is the opportunity cost of 1 kilogram of potatoes for the Rancher?

Suppose a producer can produce a product with lower opportunity cost. Which of the following is correct?

What does comparative advantage reflect?

Table 3-6 -Refer to Table 3-6. If England and Spain trade based on the principle of comparative advantage, which product will England export to Spain?

Figure 3-2 -Refer to Figure 3-2. Which of the following is true for Cliff and Paul?

Currently, a farmer can either grow 40 bushels of wheat or 120 bushels of corn per acre. If he were able to trade 80 bushels of corn for 30 bushels of wheat, would he be better off or worse off?

Figure 3-5 -Refer to Figure 3-5. If Fred and Ginger both specialize in the good in which they have a comparative advantage, what would the total production be?

If there is no trade, which of the following is most likely?

What is the difference between production possibilities frontiers that are bowed out and those that are linear?

Figure 3-5 -Refer to Figure 3-5. What is the opportunity cost of 1 pair of ballet slippers for Fred?

What is the best reason for people to provide you with goods and services?

Table 3-1 -Refer to Table 3-1. What is the opportunity cost of 1 kg of potatoes for the Rancher?

Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 20 bushels of corn or 5 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. Which of the following statements is correct?

Suppose a gardener produces both green beans and corn in her garden. If the opportunity cost of one bushel of corn is 3/5 bushel of green beans, what is the opportunity cost of 1 bushel of green beans?

Figure 3-3 Ice cream is measured in kilograms. -Refer to Figure 3-3. Which of the following is correct?

On what is trade based?

Table 3-4 -Refer to Table 3-4. Which of the following is correct?

Figure 3-4 -Refer to Figure 3-4. Which of the following is correct?

Ten Principles of Economics

Thinking Like an Economist

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

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 Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 3: Interdependence and the Gains From Trade

Table 3-2 -Refer to Table 3-2. What is the opportunity cost of 1 kilogram of potatoes for the Rancher?

Suppose a producer can produce a product with lower opportunity cost. Which of the following is correct?

What does comparative advantage reflect?

Table 3-6 -Refer to Table 3-6. If England and Spain trade based on the principle of comparative advantage, which product will England export to Spain?

Figure 3-2 -Refer to Figure 3-2. Which of the following is true for Cliff and Paul?

Currently, a farmer can either grow 40 bushels of wheat or 120 bushels of corn per acre. If he were able to trade 80 bushels of corn for 30 bushels of wheat, would he be better off or worse off?

Figure 3-5 -Refer to Figure 3-5. If Fred and Ginger both specialize in the good in which they have a comparative advantage, what would the total production be?

If there is no trade, which of the following is most likely?

What is the difference between production possibilities frontiers that are bowed out and those that are linear?

Figure 3-5 -Refer to Figure 3-5. What is the opportunity cost of 1 pair of ballet slippers for Fred?

What is the best reason for people to provide you with goods and services?

Table 3-1 -Refer to Table 3-1. What is the opportunity cost of 1 kg of potatoes for the Rancher?

Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 20 bushels of corn or 5 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. Which of the following statements is correct?

Suppose a gardener produces both green beans and corn in her garden. If the opportunity cost of one bushel of corn is 3/5 bushel of green beans, what is the opportunity cost of 1 bushel of green beans?

Figure 3-3 Ice cream is measured in kilograms. -Refer to Figure 3-3. Which of the following is correct?

On what is trade based?

Table 3-4 -Refer to Table 3-4. Which of the following is correct?

Figure 3-4 -Refer to Figure 3-4. Which of the following is correct?

Ten Principles of Economics

Thinking Like an Economist

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Unemployment and Its Natural Rate

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 Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters