Question 1

Assume for Germany that the opportunity cost to produce a jet is 50 cars.Some possible combinations of output for Germany could be:

Accepted Answer

A) (1,000 jets,5,000 cars)and (900 jets,10,000 cars). 
B) (1,000 jets,5,000 cars)and (900 jets,15,000 cars). 
C) (2,500 jets,2,000 cars)and (2,300 jets,20,000 cars). 
D) (2,500 jets,2,000 cars)and (2,300 jets,3,000 cars). 
A) (1,000 jets,5,000 cars)and (900 jets,10,000 cars). 
B) (1,000 jets,5,000 cars)and (900 jets,15,000 cars). 
C) (2,500 jets,2,000 cars)and (2,300 jets,20,000 cars). 
D) (2,500 jets,2,000 cars)and (2,300 jets,3,000 cars).

Question 2

Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year.Country A has 100 workers.Suppose a worker in Country B can make either 2 iPods or 10 tablets each year.Country B has 200 workers.Country B has the _______________ advantage in the production of tablets,which means they should specialize in __________________.

Accepted Answer

A) comparative;tablets 
B) absolute;tablets 
C) comparative;iPods 
D) absolute;iPods 
A) comparative;tablets 
B) absolute;tablets 
C) comparative;iPods 
D) absolute;iPods

Question 3

Suppose an American worker can make 100 chairs or catch 1,000 fish per day.A Chilean worker,on the other hand,can produce 40 chairs or catch 400 fish per day.Which of the following statements is true?

Accepted Answer

A) The United States has the comparative advantage in chair production. 
B) Chile has the comparative advantage in chair production. 
C) Both the United States and Chile have a comparative advantage in chair production. 
D) Neither the United States nor Chile has a comparative advantage in chair production. 
A) The United States has the comparative advantage in chair production. 
B) Chile has the comparative advantage in chair production. 
C) Both the United States and Chile have a comparative advantage in chair production. 
D) Neither the United States nor Chile has a comparative advantage in chair production.

Question 4

Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year.Country A has 100 workers.Suppose a worker in Country B can make either 2 iPods or 10 tablets each year.Country B has 200 workers.A bundle of goods that Country A could not make would be:

Accepted Answer

A) (500 iPods,150 tablets). 
B) (500 iPods,200 tablets). 
C) (500 iPods,250 tablets). 
D) (500 iPods,300 tablets). 
A) (500 iPods,150 tablets). 
B) (500 iPods,200 tablets). 
C) (500 iPods,250 tablets). 
D) (500 iPods,300 tablets).

Question 5

People will choose to specialize and trade if:

Accepted Answer

A) they can acquire the goods they want at a lower cost than it will cost them to make the good themselves. 
B) they can acquire the goods they want at a higher cost than it will cost them to make the good themselves. 
C) they can acquire the goods they want from someone who is willing to trade with them. 
D) they can acquire the goods they want from a capitalistic system of exchange. 
A) they can acquire the goods they want at a lower cost than it will cost them to make the good themselves. 
B) they can acquire the goods they want at a higher cost than it will cost them to make the good themselves. 
C) they can acquire the goods they want from someone who is willing to trade with them. 
D) they can acquire the goods they want from a capitalistic system of exchange.

Question 6

Suppose an American worker can make 50 pairs of gloves or grow 300 radishes per day.A Bangladeshi worker,on the other hand,can produce 100 pairs of gloves or grow 200 radishes per day.Using the concept of absolute advantage,which of the following statements is true?

Accepted Answer

A) The United States has the absolute advantage in the production of both gloves and radishes. 
B) The United States does not have the absolute advantage in the production of either gloves or radishes. 
C) The United States has the absolute advantage in the production of gloves,but not radishes. 
D) The United States has the absolute advantage in the production of radishes,but not gloves. 
A) The United States has the absolute advantage in the production of both gloves and radishes. 
B) The United States does not have the absolute advantage in the production of either gloves or radishes. 
C) The United States has the absolute advantage in the production of gloves,but not radishes. 
D) The United States has the absolute advantage in the production of radishes,but not gloves.

Question 7

What drives a country's limits to acceptable terms of trade?

Accepted Answer

A) Their opportunity costs 
B) Whether they possess the absolute advantage in the production of a good 
C) Both of these statements are true. 
D) Neither of these statements is true. 
A) Their opportunity costs 
B) Whether they possess the absolute advantage in the production of a good 
C) Both of these statements are true. 
D) Neither of these statements is true.

Question 8

Tom and Jerry have two tasks to do all day: set traps and build bombs.If Tom spends all day setting traps,he will have set 16 traps.If he instead devotes his day to building bombs,Tom will build 4 bombs.If Jerry spends his day setting traps,he will set 14 traps;if he spends the day building bombs,he will build 7 bombs.For Jerry,the opportunity cost of building a bomb is ________ traps set.

Accepted Answer

A) 14 
B) 7 
C) 4 
D) 2 
A) 14 
B) 7 
C) 4 
D) 2

Question 9

Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year.Country A has 200 workers.Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year.Country B has 400 workers.Suppose Country B decides to specialize in tomatoes,and Country A specializes in bananas.What terms of trade would both countries agree to?

Accepted Answer

A) One tomato for one banana 
B) One tomato for two bananas 
C) One tomato for four bananas 
D) One tomato for six bananas 
A) One tomato for one banana 
B) One tomato for two bananas 
C) One tomato for four bananas 
D) One tomato for six bananas

Question 10

Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year.Country A has 200 workers.Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year.Country B has 400 workers.Suppose Country A specializes in bananas,and Country B specializes in tomatoes.The limits to the terms of trade that Country B would find acceptable are:

Accepted Answer

A) Country B will accept no more than 3 bananas for each tomato. 
B) Country B will accept no less than 3 bananas for each tomato. 
C) Country B will accept no more than 1 tomato for every 3 bananas. 
D) Country B will accept no less than 1 tomato for every 3 bananas. 
A) Country B will accept no more than 3 bananas for each tomato. 
B) Country B will accept no less than 3 bananas for each tomato. 
C) Country B will accept no more than 1 tomato for every 3 bananas. 
D) Country B will accept no less than 1 tomato for every 3 bananas.

Question 11

When two countries specialize and trade with one another:

Accepted Answer

A) total production remains unchanged,but consumption rises. 
B) total production increases,but only if comparative advantage exists. 
C) total production may increase,depending on trade relations. 
D) total production and consumption remain unchanged. 
A) total production remains unchanged,but consumption rises. 
B) total production increases,but only if comparative advantage exists. 
C) total production may increase,depending on trade relations. 
D) total production and consumption remain unchanged.

Question 12

Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year.Country A has 200 workers.Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year.Country B has 400 workers.The opportunity cost of one tomato in Country B is:

Accepted Answer

A) 108 bananas. 
B) 18 bananas. 
C) 6 bananas. 
D) 3 bananas. 
A) 108 bananas. 
B) 18 bananas. 
C) 6 bananas. 
D) 3 bananas.

Question 13

Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day.A Canadian worker,on the other hand,can produce 10 pairs of shoes or grow 20 apples per day.The opportunity cost for the United States is:

Accepted Answer

A) 5 apples for each pair of shoes. 
B) 5 pairs of shoes for each apple. 
C) 1/5 apple for each pair of shoes. 
D) 1 pair of shoes for every 2 apples. 
A) 5 apples for each pair of shoes. 
B) 5 pairs of shoes for each apple. 
C) 1/5 apple for each pair of shoes. 
D) 1 pair of shoes for every 2 apples.

Question 14

Tom and Jerry have two tasks to do all day: set traps and build bombs.If Tom spends all day setting traps,he will have set 16 traps.If he instead devotes his day to building bombs,Tom will build 4 bombs.If Jerry spends his day setting traps,he will set 14 traps;if he spends the day building bombs,he will build 7 bombs.The opportunity cost of one bomb is _______ for Tom and ________ for Jerry.Therefore Tom should specialize in ______________.

Accepted Answer

A) 4 traps;2 traps;traps 
B) 16 traps;14 traps;traps 
C) 4 traps;2 traps;bombs 
D) 16 traps;14 traps;bombs 
A) 4 traps;2 traps;traps 
B) 16 traps;14 traps;traps 
C) 4 traps;2 traps;bombs 
D) 16 traps;14 traps;bombs

Question 15

If a country possesses the absolute advantage in the production of one good:

Accepted Answer

A) then it must also possess the absolute advantage in the production of the other good. 
B) then it must also possess the comparative advantage in the production of that good. 
C) then it must also possess the comparative advantage in the production of the other good. 
D) it can produce more of that good given the same resources. 
A) then it must also possess the absolute advantage in the production of the other good. 
B) then it must also possess the comparative advantage in the production of that good. 
C) then it must also possess the comparative advantage in the production of the other good. 
D) it can produce more of that good given the same resources.

Question 16

When a producer has a comparative advantage at producing a good,it means the producer:

Accepted Answer

A) can produce more of that good than others with the same number of workers. 
B) has the ability to produce a good or service at a lower opportunity cost than others. 
C) has no reason to trade with others. 
D) is efficient. 
A) can produce more of that good than others with the same number of workers. 
B) has the ability to produce a good or service at a lower opportunity cost than others. 
C) has no reason to trade with others. 
D) is efficient.

Question 17

The United States and Canada trade hockey skates and apple pie.The United States has an absolute and a comparative advantage in the production of apple pie,therefore:

Accepted Answer

A) Canada must have the comparative advantage in the production of skates. 
B) Canada must have the absolute advantage in the production of skates. 
C) Canada must have the absolute and comparative advantage in the production of skates. 
D) the United States must have the comparative advantage in the production of skates,too. 
A) Canada must have the comparative advantage in the production of skates. 
B) Canada must have the absolute advantage in the production of skates. 
C) Canada must have the absolute and comparative advantage in the production of skates. 
D) the United States must have the comparative advantage in the production of skates,too.

Question 18

Tom and Jerry have two tasks to do all day: set traps and build bombs.If Tom spends all day setting traps,he will have set 16 traps.If he instead devotes his day to building bombs,Tom will build 4 bombs.If Jerry spends his day setting traps,he will set 14 traps;if he spends the day building bombs,he will build 7 bombs.At the end of the day,Tom could have:

Accepted Answer

A) either 16 traps and 4 bombs,or 8 traps and 2 bombs. 
B) either 8 traps and 2 bombs,or 4 traps and 6 bombs. 
C) either 8 traps and 2 bombs,or 4 traps and 4 bombs. 
D) either 12 traps and 3 bombs,or 8 traps and 3 bombs. 
A) either 16 traps and 4 bombs,or 8 traps and 2 bombs. 
B) either 8 traps and 2 bombs,or 4 traps and 6 bombs. 
C) either 8 traps and 2 bombs,or 4 traps and 4 bombs. 
D) either 12 traps and 3 bombs,or 8 traps and 3 bombs.

Question 19

Barbie and Ken are married.Barbie stays home and cares for the children,while Ken spends his day at work earning money to support the household.Economists might conclude:

Accepted Answer

A) Barbie has a higher opportunity cost of caring for the children compared to Ken,and therefore chooses to specialize in childcare. 
B) Ken has a lower opportunity cost of caring for the children compared to Barbie,and therefore chooses to let Barbie specialize in childcare while he works. 
C) Ken has the comparative advantage in caring for the children,while Barbie has it in earning money. 
D) Barbie has the comparative advantage in caring for the children,and so the family benefits by Barbie staying home and Ken earning money at work. 
A) Barbie has a higher opportunity cost of caring for the children compared to Ken,and therefore chooses to specialize in childcare. 
B) Ken has a lower opportunity cost of caring for the children compared to Barbie,and therefore chooses to let Barbie specialize in childcare while he works. 
C) Ken has the comparative advantage in caring for the children,while Barbie has it in earning money. 
D) Barbie has the comparative advantage in caring for the children,and so the family benefits by Barbie staying home and Ken earning money at work.

Question 20

Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day.A Canadian worker,on the other hand,can produce 10 pairs of shoes or grow 20 apples per day.The opportunity cost for Canada is:

Accepted Answer

A) 2 apples for each pair of shoes. 
B) 2 pairs of shoes for each apple. 
C) ½ apple for each pair of shoes. 
D) ½ pair of shoes for every 2 apples. 
A) 2 apples for each pair of shoes. 
B) 2 pairs of shoes for each apple. 
C) ½ apple for each pair of shoes. 
D) ½ pair of shoes for every 2 apples.

Exam 2: Specialization and Exchange

Assume for Germany that the opportunity cost to produce a jet is 50 cars.Some possible combinations of output for Germany could be:

Suppose an American worker can make 100 chairs or catch 1,000 fish per day.A Chilean worker,on the other hand,can produce 40 chairs or catch 400 fish per day.Which of the following statements is true?

Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year.Country A has 100 workers.Suppose a worker in Country B can make either 2 iPods or 10 tablets each year.Country B has 200 workers.A bundle of goods that Country A could not make would be:

People will choose to specialize and trade if:

Suppose an American worker can make 50 pairs of gloves or grow 300 radishes per day.A Bangladeshi worker,on the other hand,can produce 100 pairs of gloves or grow 200 radishes per day.Using the concept of absolute advantage,which of the following statements is true?

What drives a country's limits to acceptable terms of trade?

When two countries specialize and trade with one another:

Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year.Country A has 200 workers.Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year.Country B has 400 workers.The opportunity cost of one tomato in Country B is:

Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day.A Canadian worker,on the other hand,can produce 10 pairs of shoes or grow 20 apples per day.The opportunity cost for the United States is:

If a country possesses the absolute advantage in the production of one good:

When a producer has a comparative advantage at producing a good,it means the producer:

The United States and Canada trade hockey skates and apple pie.The United States has an absolute and a comparative advantage in the production of apple pie,therefore:

Barbie and Ken are married.Barbie stays home and cares for the children,while Ken spends his day at work earning money to support the household.Economists might conclude:

Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day.A Canadian worker,on the other hand,can produce 10 pairs of shoes or grow 20 apples per day.The opportunity cost for Canada is:

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