Question 1

Absolute advantage is found by comparing different producers'

Accepted Answer

A)  opportunity costs. 
B)  payments to land,labor,and capital. 
C)  input requirements per unit of output. 
D)  locational and logistical circumstances. 
A)  opportunity costs. 
B)  payments to land,labor,and capital. 
C)  input requirements per unit of output. 
D)  locational and logistical circumstances.

Question 2

Suppose that a worker in Freedonia can produce either 6 units of corn or 2 units of wheat per year,and a worker in Sylvania can produce either 2 units of corn or 6 units of wheat per year.Each nation has 10 workers.For many years the two countries traded,each completely specializing according to their respective comparative advantages.Now,however,war has broken out between them and all trade has stopped.Without trade,Freedonia produces and consumes 30 units of corn and 10 units of wheat per year.Sylvania produces and consumes 10 units of corn and 30 units of wheat.The war has caused the combined yearly output of the two countries to decline by

Accepted Answer

A)  10 units of corn and 10 units of wheat. 
B)  20 units of corn and 20 units of wheat. 
C)  30 units of corn and 30 units of wheat. 
D)  40 units of corn and 40 units of wheat. 
A)  10 units of corn and 10 units of wheat. 
B)  20 units of corn and 20 units of wheat. 
C)  30 units of corn and 30 units of wheat. 
D)  40 units of corn and 40 units of wheat.

Question 3

When can two countries gain from trading two goods?

Accepted Answer

A)  when the first country can only produce the first good and the second country can only produce the second good 
B)  when the first country can produce both goods,but can only produce the second good at great cost,and the second country can produce both goods,but can only produce the first good at great cost 
C)  when the first country is better at producing both goods and the second country is worse at producing both goods 
D)  Two countries could gain from trading two goods under all of the above conditions. 
A)  when the first country can only produce the first good and the second country can only produce the second good 
B)  when the first country can produce both goods,but can only produce the second good at great cost,and the second country can produce both goods,but can only produce the first good at great cost 
C)  when the first country is better at producing both goods and the second country is worse at producing both goods 
D)  Two countries could gain from trading two goods under all of the above conditions.

Question 4

In most countries today,many goods and services consumed are imported from abroad,and many goods and services produced are exported to foreign customers.

Accepted Answer

A) True 
 B)False

Question 5

Figure 3-10
Alice and Betty's Production Possibilities in one 8-hour day.
      
-Refer to Figure 3-10.Both Alice and Betty

Accepted Answer

A)  face a constant trade-off between producing pitchers of lemonade and pizzas. 
B)  can produce more pizzas than pitchers of lemonade if they devote all of their time to pizza production. 
C)  would benefit from specializing in lemonade production. 
D)  would benefit from specializing in pizza production. 
A)  face a constant trade-off between producing pitchers of lemonade and pizzas. 
B)  can produce more pizzas than pitchers of lemonade if they devote all of their time to pizza production. 
C)  would benefit from specializing in lemonade production. 
D)  would benefit from specializing in pizza production.

Question 6

If one producer is able to produce a good at a lower opportunity cost than some other producer,then the producer with the lower opportunity cost is said to have an absolute advantage in the production of that good.

Accepted Answer

A) True 
 B)False

Question 7

Figure 3-4
      
-Refer to Figure 3-4.The opportunity cost of 1 novel for Perry is

Accepted Answer

A)  1/6 poem. 
B)  2 poems. 
C)  6 poems. 
D)  12 poems. 
A)  1/6 poem. 
B)  2 poems. 
C)  6 poems. 
D)  12 poems.

Question 8

Table 3-3
Assume that Zimbabwe and Portugal can switch between producing toothbrushes and producing hairbrushes at a constant rate.
  
-Refer to Table 3-3.Which of the following combinations of toothbrushes and hairbrushes could Portugal produce in 30 minutes?

Accepted Answer

A)  1 toothbrush and 4 hairbrushes 
B)  4 toothbrushes and 2 hairbrushes 
C)  5 toothbrushes and 6 hairbrushes 
D)  6 toothbrushes and 5 hairbrushes 
A)  1 toothbrush and 4 hairbrushes 
B)  4 toothbrushes and 2 hairbrushes 
C)  5 toothbrushes and 6 hairbrushes 
D)  6 toothbrushes and 5 hairbrushes

Question 9

Which of the following is not correct?

Accepted Answer

A)  The producer who requires a smaller quantity of inputs to produce a good is said to have an absolute advantage in producing that good. 
B)  The producer who gives up less of other goods to produce Good X has the smaller opportunity cost of producing Good X. 
C)  The producer who has the smaller opportunity cost of producing a good is said to have a comparative advantage in producing that good. 
D)  The gains from specialization and trade are based not on comparative advantage but on absolute advantage. 
A)  The producer who requires a smaller quantity of inputs to produce a good is said to have an absolute advantage in producing that good. 
B)  The producer who gives up less of other goods to produce Good X has the smaller opportunity cost of producing Good X. 
C)  The producer who has the smaller opportunity cost of producing a good is said to have a comparative advantage in producing that good. 
D)  The gains from specialization and trade are based not on comparative advantage but on absolute advantage.

Question 10

Suppose the United States has a comparative advantage over Mexico in producing pork.The principle of comparative advantage asserts that

Accepted Answer

A)  the United States should produce more pork than what it requires and export some of it to Mexico. 
B)  the United States should produce a moderate quantity of pork and import the remainder of what it requires from Mexico. 
C)  the United States should refrain altogether from producing pork and import all of what it requires from Mexico. 
D)  Mexico has nothing to gain from importing United States pork. 
A)  the United States should produce more pork than what it requires and export some of it to Mexico. 
B)  the United States should produce a moderate quantity of pork and import the remainder of what it requires from Mexico. 
C)  the United States should refrain altogether from producing pork and import all of what it requires from Mexico. 
D)  Mexico has nothing to gain from importing United States pork.

Question 11

To produce 100 bushels of wheat,Farmer A requires fewer inputs than does Farmer B.We can conclude that Farmer A has an absolute advantage over Farmer B in producing wheat.

Accepted Answer

A) True 
 B)False

Question 12

When two countries trade with one another,it is most likely because

Accepted Answer

A)  the wealthy people in each of the two countries are able to benefit,through trade,by taking advantage of other people who are poor. 
B)  some people involved in the trade do not understand that one of the two countries will become worse-off because of the trade. 
C)  the opportunity costs of producing various goods are identical for the two countries. 
D)  the two countries wish to take advantage of the principle of comparative advantage. 
A)  the wealthy people in each of the two countries are able to benefit,through trade,by taking advantage of other people who are poor. 
B)  some people involved in the trade do not understand that one of the two countries will become worse-off because of the trade. 
C)  the opportunity costs of producing various goods are identical for the two countries. 
D)  the two countries wish to take advantage of the principle of comparative advantage.

Question 13

Table 3-9
Barb and Jim run a business that sets up and tests computers.Assume that Barb and Jim can switch between setting up and testing computers at a constant rate.The following table applies.
  
-Refer to Table 3-9.Barb's opportunity cost of testing one computer is setting up

Accepted Answer

A)  4/5 computer and Jim's opportunity cost of testing one computer is setting up 3/4 computer. 
B)  4/5 computer and Jim's opportunity cost of testing one computer is setting up 4/3 computers. 
C)  5/4 computers and Jim's opportunity cost of testing one computer is setting up 3/4 computer. 
D)  5/4 computers and Jim's opportunity cost of testing one computer is setting up 4/3 computers. 
A)  4/5 computer and Jim's opportunity cost of testing one computer is setting up 3/4 computer. 
B)  4/5 computer and Jim's opportunity cost of testing one computer is setting up 4/3 computers. 
C)  5/4 computers and Jim's opportunity cost of testing one computer is setting up 3/4 computer. 
D)  5/4 computers and Jim's opportunity cost of testing one computer is setting up 4/3 computers.

Question 14

Figure 3-7
      
-Refer to Figure 3-7.Bintu has a comparative advantage in the production of

Accepted Answer

A)  bowls and Juba has a comparative advantage in the production of cups. 
B)  cups and Juba has a comparative advantage in the production of bowls. 
C)  both goods and Juba has a comparative advantage in the production of neither good. 
D)  neither good and Juba has a comparative advantage in the production of both goods. 
A)  bowls and Juba has a comparative advantage in the production of cups. 
B)  cups and Juba has a comparative advantage in the production of bowls. 
C)  both goods and Juba has a comparative advantage in the production of neither good. 
D)  neither good and Juba has a comparative advantage in the production of both goods.

Question 15

Table 3-6
Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate.
  
-Refer to Table 3-6.Which of the following combinations of mixers and toasters could Maya produce in 40 hours?

Accepted Answer

A)  1 mixers and 7 toasters. 
B)  2 mixers and 5 toasters. 
C)  2.5 mixers and 4 toasters. 
D)  3 mixers and 4 toasters. 
A)  1 mixers and 7 toasters. 
B)  2 mixers and 5 toasters. 
C)  2.5 mixers and 4 toasters. 
D)  3 mixers and 4 toasters.

Question 16

Figure 3-4
      
-Refer to Figure 3-4.The opportunity cost of 1 poem for Perry is

Accepted Answer

A)  1/12 novel. 
B)  1/6 novel. 
C)  2 novels. 
D)  6 novels. 
A)  1/12 novel. 
B)  1/6 novel. 
C)  2 novels. 
D)  6 novels.

Question 17

Table 3-10
Juanita and Shantala run a business that programs and tests cellular phones.Assume that Juanita and Shantala can switch between programming and testing cellular phones at a constant rate.The following table applies.
  
-Refer to Table 3-10.Shantala has an absolute advantage in

Accepted Answer

A)  programming cellular phones and a comparative advantage in programming cellular phones. 
B)  programming cellular phones and a comparative advantage in testing cellular phones. 
C)  testing cellular phones and a comparative advantage in programming cellular phones. 
D)  testing cellular phones and a comparative advantage in testing cellular phones. 
A)  programming cellular phones and a comparative advantage in programming cellular phones. 
B)  programming cellular phones and a comparative advantage in testing cellular phones. 
C)  testing cellular phones and a comparative advantage in programming cellular phones. 
D)  testing cellular phones and a comparative advantage in testing cellular phones.

Question 18

Figure 3-6
      
-Refer to Figure 3-6.Suppose Daisy decides to increase her production of pies by 6.What is the opportunity cost of this decision?

Accepted Answer

A)  8/3 tarts 
B)  4.5 tarts 
C)  8 tarts 
D)  10 tarts 
A)  8/3 tarts 
B)  4.5 tarts 
C)  8 tarts 
D)  10 tarts

Question 19

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 20

Suppose that a worker in Freedonia can produce either 6 units of corn or 2 units of wheat per year,and a worker in Sylvania can produce either 2 units of corn or 6 units of wheat per year.Each nation has 10 workers.Without trade,Freedonia produces and consumes 30 units of corn and 10 units of wheat per year.Sylvania produces and consumes 10 units of corn and 30 units of wheat.Suppose that trade is then initiated between the two countries,and Freedonia sends 30 units of corn to Sylvania in exchange for 30 units of wheat.Freedonia will now be able to consume a maximum of

Accepted Answer

A)  30 units of corn and 30 units of wheat. 
B)  40 units of corn and 30 units of wheat. 
C)  40 units of corn and 20 units of wheat. 
D)  10 units of corn and 40 units of wheat. 
A)  30 units of corn and 30 units of wheat. 
B)  40 units of corn and 30 units of wheat. 
C)  40 units of corn and 20 units of wheat. 
D)  10 units of corn and 40 units of wheat.

Exam 3: Interdependence and the Gains From Trade

Absolute advantage is found by comparing different producers'

When can two countries gain from trading two goods?

In most countries today,many goods and services consumed are imported from abroad,and many goods and services produced are exported to foreign customers.

Figure 3-10 Alice and Betty's Production Possibilities in one 8-hour day. -Refer to Figure 3-10.Both Alice and Betty

If one producer is able to produce a good at a lower opportunity cost than some other producer,then the producer with the lower opportunity cost is said to have an absolute advantage in the production of that good.

Figure 3-4 -Refer to Figure 3-4.The opportunity cost of 1 novel for Perry is

Table 3-3 Assume that Zimbabwe and Portugal can switch between producing toothbrushes and producing hairbrushes at a constant rate. -Refer to Table 3-3.Which of the following combinations of toothbrushes and hairbrushes could Portugal produce in 30 minutes?

Which of the following is not correct?

Suppose the United States has a comparative advantage over Mexico in producing pork.The principle of comparative advantage asserts that

To produce 100 bushels of wheat,Farmer A requires fewer inputs than does Farmer B.We can conclude that Farmer A has an absolute advantage over Farmer B in producing wheat.

When two countries trade with one another,it is most likely because

Table 3-9 Barb and Jim run a business that sets up and tests computers.Assume that Barb and Jim can switch between setting up and testing computers at a constant rate.The following table applies. -Refer to Table 3-9.Barb's opportunity cost of testing one computer is setting up

Figure 3-7 -Refer to Figure 3-7.Bintu has a comparative advantage in the production of

Table 3-6 Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate. -Refer to Table 3-6.Which of the following combinations of mixers and toasters could Maya produce in 40 hours?

Figure 3-4 -Refer to Figure 3-4.The opportunity cost of 1 poem for Perry is

Table 3-10 Juanita and Shantala run a business that programs and tests cellular phones.Assume that Juanita and Shantala can switch between programming and testing cellular phones at a constant rate.The following table applies. -Refer to Table 3-10.Shantala has an absolute advantage in

Figure 3-6 -Refer to Figure 3-6.Suppose Daisy decides to increase her production of pies by 6.What is the opportunity cost of this decision?

Ten Principles of Economics

Thinking Like an Economist

The Market Forces of Supply and Demand

Elasticity and Its Application

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 Costs of Production

Firms in Competitive Markets

Monopoly

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

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

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