Question 1

Table 3-5
  
-Refer to Table 3-5. If Canada and Japan trade based on the principle of comparative advantage, what product will Canada export to Japan?

Accepted Answer

A) Cars 
B) both airplanes and cars 
C) Airplanes 
D) Canada should buy both products from Japan. 
A) Cars 
B) both airplanes and cars 
C) Airplanes 
D) Canada should buy both products from Japan.

Question 2

Figure 3-5  
-Refer to Figure 3-5. If Fred and Ginger devote 1/2 of their time (20 hours) to the production of each good, what would the total production be?

Accepted Answer

A) 7 ballet slippers and 8 tap shoes. 
B) 8 ballet slippers and 8 tap shoes. 
C) 9 ballet slippers and 6 tap shoes. 
D) 10 ballet slippers and 8 tap shoes. 
A) 7 ballet slippers and 8 tap shoes. 
B) 8 ballet slippers and 8 tap shoes. 
C) 9 ballet slippers and 6 tap shoes. 
D) 10 ballet slippers and 8 tap shoes.

Question 3

Which of the following is NOT correct?

Accepted Answer

A) Trade allows for specialization. 
B) Trade is good for nations. 
C) Trade is based on absolute advantage. 
D) Trade allows individuals to consume outside of their individual production possibilities curve. 
A) Trade allows for specialization. 
B) Trade is good for nations. 
C) Trade is based on absolute advantage. 
D) Trade allows individuals to consume outside of their individual production possibilities curve.

Question 4

Table 3-2
  
-Refer to Table 3-62. Which of the following is correct?

Accepted Answer

A) The Farmer has an absolute advantage in meat, and the Rancher has an absolute advantage in potatoes. 
B) The Farmer has an absolute advantage in potatoes, and the Rancher has an absolute advantage in meat. 
C) The Farmer has an absolute advantage in neither good, and the Rancher has an absolute advantage in both goods. 
D) The Farmer has an absolute advantage in potatoes, and the Rancher has an absolute advantage in neither good. 
A) The Farmer has an absolute advantage in meat, and the Rancher has an absolute advantage in potatoes. 
B) The Farmer has an absolute advantage in potatoes, and the Rancher has an absolute advantage in meat. 
C) The Farmer has an absolute advantage in neither good, and the Rancher has an absolute advantage in both goods. 
D) The Farmer has an absolute advantage in potatoes, and the Rancher has an absolute advantage in neither good.

Question 5

Gary and Diane 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 Gary 10 hours to do the required calculations and 10 hours to prepare the slides. It would take Diane 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 specialize in calculating or preparing slides?
c.If Diane and Gary have the same opportunity cost of $5 per hour, is there a better solution than for each to specialize in calculating or preparing slides?

Accepted Answer

a.If both tasks are divided equally, it

Question 6

Which of the following is correct regarding Adam Smith?

Accepted Answer

A) He wrote An Inquiry into the Nature and Causes of the Wealth of Nations. 
B) He opposed free trade. 
C) He wrote the General Theory of Economics. 
D) He believed people were irrational. 
A) He wrote An Inquiry into the Nature and Causes of the Wealth of Nations. 
B) He opposed free trade. 
C) He wrote the General Theory of Economics. 
D) He believed people were irrational.

Question 7

Suppose that a worker in Agland can produce either 10 units of organic grain or 2 units of incense per year, and a worker in Zenland can produce either 5 units of organic grain or 15 units of incense per year. There are 20 workers in Agland and 10 workers in Zenland. Currently the two countries do not trade. Agland produces and consumes 100 units of grain and 20 units of incense per year. Zenland produces and consumes 50 units of grain and no incense per year. The combined output of the two countries is therefore 150 units of grain and 20 units of incense per year. If the two countries decided to trade, and completely specialized in producing the good for which each has a comparative advantage, what would the combined yearly output of the two countries be?

Accepted Answer

A) 50 units of grain and 40 units of incense. 
B) 200 units of grain and 150 units of incense. 
C) 150 units of grain and 20 units of incense. 
D) 200 units of grain and 300 units of incense. 
A) 50 units of grain and 40 units of incense. 
B) 200 units of grain and 150 units of incense. 
C) 150 units of grain and 20 units of incense. 
D) 200 units of grain and 300 units of incense.

Question 8

Trade is based on absolute advantage.

Accepted Answer

A) True 
 B)False

Question 9

International trade may make some individuals in a nation better off, while other individuals are made worse off.

Accepted Answer

A) True 
 B)False

Question 10

Table 3-6
  
-Refer to Table 3-6. How could England and Spain benefit?

Accepted Answer

A) By England specializing in bread and Spain specializing in cheese. 
B) By England specializing in cheese and Spain specializing in bread. 
C) By England specializing in both goods and Spain specializing in neither good. 
D) By England specializing in neither good and Spain specializing in both goods. 
A) By England specializing in bread and Spain specializing in cheese. 
B) By England specializing in cheese and Spain specializing in bread. 
C) By England specializing in both goods and Spain specializing in neither good. 
D) By England specializing in neither good and Spain specializing in both goods.

Question 11

Table 3-6
  
-Refer to Table 3-6. What is the opportunity cost of 1 unit of bread in Spain?

Accepted Answer

A) 4 cheeses. 
B) 2 cheeses. 
C) 1 cheese. 
D) 1/4 cheese. 
A) 4 cheeses. 
B) 2 cheeses. 
C) 1 cheese. 
D) 1/4 cheese.

Question 12

When can a country's consumption possibilities frontier be outside its production possibilities frontier?

Accepted Answer

A) If additional resources become available. 
B) If there is an increase in the level of technology. 
C) If the country engages in trade. 
D) If resources are shiftable. 
A) If additional resources become available. 
B) If there is an increase in the level of technology. 
C) If the country engages in trade. 
D) If resources are shiftable.

Question 13

Who developed the principle of comparative advantage?

Accepted Answer

A) Paul Samuelson. 
B) David Ricardo. 
C) John Maynard Keynes. 
D) Adam Smith. 
A) Paul Samuelson. 
B) David Ricardo. 
C) John Maynard Keynes. 
D) Adam Smith.

Question 14

Figure 3-6  
-Refer to Figure 3-6. What is the opportunity cost of 1 pie for Betty?

Accepted Answer

A) 1/4 loaf of bread. 
B) 3/4 loaf of bread. 
C) 1 loaf of bread. 
D) 4/3 loaves of bread. 
A) 1/4 loaf of bread. 
B) 3/4 loaf of bread. 
C) 1 loaf of bread. 
D) 4/3 loaves of bread.

Question 15

Differences in opportunity cost allow for gains from trade.

Accepted Answer

A) True 
 B)False

Question 16

Figure 3-2    
-Refer to Figure 3-2. Assume that Cliff and Paul were both producing wheat and corn, and both were dividing their time equally between the two. Then they decide to specialize in the product for which they have a comparative advantage. What would happen to the production of corn?

Accepted Answer

A) Increase by 1 bushel. 
B) Increase by 2 bushels. 
C) Increase by 3 bushels. 
D) Increase by 4 bushels. 
A) Increase by 1 bushel. 
B) Increase by 2 bushels. 
C) Increase by 3 bushels. 
D) Increase by 4 bushels.

Question 17

Figure 3-3
Ice cream is measured in kilograms.  
-Refer to Figure 3-3. Ben and Jerry were currently both producing at point A on their production possibilities frontier and then Ben decided he would be willing to trade 4 pounds of cones to get 2 pounds of ice cream from Jerry. If both decided to specialize in what they had a comparative advantage in and trade, what would be the gains from trade?

Accepted Answer

A) 1 pound of cones for Ben and 1 pound of ice cream for Jerry. 
B) 1 pound of ice cream for Ben and 1 pound of cones for Jerry. 
C) 2 pounds of ice cream for Ben and 2 pounds of cones for Jerry. 
D) 2 pounds of ice cream for Ben and 1 pound of cones for Jerry. 
A) 1 pound of cones for Ben and 1 pound of ice cream for Jerry. 
B) 1 pound of ice cream for Ben and 1 pound of cones for Jerry. 
C) 2 pounds of ice cream for Ben and 2 pounds of cones for Jerry. 
D) 2 pounds of ice cream for Ben and 1 pound of cones for Jerry.

Question 18

Unless two people who are producing two goods have exactly the same opportunity costs, each will have a comparative advantage in a different good.

Accepted Answer

A) True 
 B)False

Question 19

Figure 3-3
Ice cream is measured in kilograms.  
-Refer to Figure 3-3. Suppose that Ben and Jerry have both decided to produce at point A on their production possibilities frontiers. What do we know?

Accepted Answer

A) This is not an efficient combination for either Ben or Jerry. 
B) Ben and Jerry are both allocating 1/2 their time to the production of each good. 
C) no other production point is as efficient for both Ben and Jerry to produce as point A. 
D) Both should always attempt to produce an equal number of cones and ice cream. 
A) This is not an efficient combination for either Ben or Jerry. 
B) Ben and Jerry are both allocating 1/2 their time to the production of each good. 
C) no other production point is as efficient for both Ben and Jerry to produce as point A. 
D) Both should always attempt to produce an equal number of cones and ice cream.

Question 20

Table 3-5
  
-Refer to Table 3-5. If Canada and Japan trade based on the principle of comparative advantage, what product will Japan export to Canada?

Accepted Answer

A) Cars 
B) both airplanes and cars 
C) Airplanes 
D) Japan should buy both products from Canada. 
A) Cars 
B) both airplanes and cars 
C) Airplanes 
D) Japan should buy both products from Canada.

Table 3-5 -Refer to Table 3-5. If Canada and Japan trade based on the principle of comparative advantage, what product will Canada export to Japan?

Figure 3-5 -Refer to Figure 3-5. If Fred and Ginger devote 1/2 of their time (20 hours) to the production of each good, what would the total production be?

Which of the following is NOT correct?

Table 3-2 -Refer to Table 3-62. Which of the following is correct?

Which of the following is correct regarding Adam Smith?

Trade is based on absolute advantage.

International trade may make some individuals in a nation better off, while other individuals are made worse off.

Table 3-6 -Refer to Table 3-6. How could England and Spain benefit?

Table 3-6 -Refer to Table 3-6. What is the opportunity cost of 1 unit of bread in Spain?

When can a country's consumption possibilities frontier be outside its production possibilities frontier?

Who developed the principle of comparative advantage?

Figure 3-6 -Refer to Figure 3-6. What is the opportunity cost of 1 pie for Betty?

Differences in opportunity cost allow for gains from trade.

Figure 3-2 -Refer to Figure 3-2. Assume that Cliff and Paul were both producing wheat and corn, and both were dividing their time equally between the two. Then they decide to specialize in the product for which they have a comparative advantage. What would happen to the production of corn?

Unless two people who are producing two goods have exactly the same opportunity costs, each will have a comparative advantage in a different good.

Figure 3-3 Ice cream is measured in kilograms. -Refer to Figure 3-3. Suppose that Ben and Jerry have both decided to produce at point A on their production possibilities frontiers. What do we know?

Table 3-5 -Refer to Table 3-5. If Canada and Japan trade based on the principle of comparative advantage, what product will Japan export to Canada?

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 3-5 -Refer to Table 3-5. If Canada and Japan trade based on the principle of comparative advantage, what product will Canada export to Japan?

Figure 3-5 -Refer to Figure 3-5. If Fred and Ginger devote 1/2 of their time (20 hours) to the production of each good, what would the total production be?

Which of the following is NOT correct?

Table 3-2 -Refer to Table 3-62. Which of the following is correct?

Which of the following is correct regarding Adam Smith?

Trade is based on absolute advantage.

International trade may make some individuals in a nation better off, while other individuals are made worse off.

Table 3-6 -Refer to Table 3-6. How could England and Spain benefit?

Table 3-6 -Refer to Table 3-6. What is the opportunity cost of 1 unit of bread in Spain?

When can a country's consumption possibilities frontier be outside its production possibilities frontier?

Who developed the principle of comparative advantage?

Figure 3-6 -Refer to Figure 3-6. What is the opportunity cost of 1 pie for Betty?

Differences in opportunity cost allow for gains from trade.

Figure 3-2 -Refer to Figure 3-2. Assume that Cliff and Paul were both producing wheat and corn, and both were dividing their time equally between the two. Then they decide to specialize in the product for which they have a comparative advantage. What would happen to the production of corn?

Unless two people who are producing two goods have exactly the same opportunity costs, each will have a comparative advantage in a different good.

Figure 3-3 Ice cream is measured in kilograms. -Refer to Figure 3-3. Suppose that Ben and Jerry have both decided to produce at point A on their production possibilities frontiers. What do we know?

Table 3-5 -Refer to Table 3-5. If Canada and Japan trade based on the principle of comparative advantage, what product will Japan export to Canada?

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