Deck 3: Exchange and Markets

Question 1

Table 3.1
Table 3.1 illustrates Willy and Blythe's hourly production for apples and carrots.From the table,we can conclude that

A) Willy should specialize in carrots and trade for apples.
B) Willy should specialize in apples and trade for carrots.
C) Blythe should specialize in both goods.
D) Willy should specialize in both goods.

Answer 1

Willy should specialize in carrots and trade for apples.

Question 2

Table 3.1
Table 3.1 illustrates Willy and Blythe's hourly production for apples and carrots.Based on the table,Willy's opportunity cost of 1 apple is

A) 2/3 of a carrot.
B) 1 carrot.
C) 4 carrots.
D) 6 carrots.

Answer 2

2/3 of a carrot.

Question 3

Table 3.2
Consider two individuals,Rose and Sharon,who produce fish and coconuts.Rose and Sharon's hourly productivity are shown in Table 3.2.Rose's opportunity cost of producing 1 coconut is

A) 1/3 of a fish.
B) 1 1/2 fish.
C) 3 fish.
D) 6 fish.

Answer 3

1/3 of a fish.

Question 4

Suppose that in the time it takes for him to bake a cake,Bob can produce 5 pairs of jeans.In the time it takes for Joe to bake a cake,he can produce 8 pairs of jeans.In this example,who has the comparative advantage in baking a cake?

A) Joe
B) both Bob and Joe
C) Bob
D) neither Bob nor Joe

Question 5

Table 3.1
Table 3.1 illustrates Willy and Blythe's hourly production for apples and carrots.From the table,we can conclude that

A) Blythe should specialize in carrots and trade for apples.
B) Blythe should specialize in apples and trade for carrots.
C) Blythe should specialize in both goods.
D) Willy should specialize in both goods.

Question 6

Table 3.1
Table 3.1 illustrates Willy and Blythe's hourly production for apples and carrots.From the table,we can conclude that

A) Blythe has an absolute advantage in producing apples but not carrots.
B) Blythe has an absolute advantage in producing carrots but not apples.
C) Blythe has an absolute advantage in producing both goods.
D) Blythe has an absolute advantage in producing neither good.

Question 7

Table 3.1
Table 3.1 illustrates Willy and Blythe's hourly production for apples and carrots.From the table,we can conclude that

A) Willy has both an absolute and comparative advantage in apple production.
B) Willy has both an absolute and comparative advantage in carrot production.
C) Willy has neither an absolute nor comparative advantage in apple production.
D) Willy has neither an absolute nor a comparative advantage in carrot production.

Question 8

Table 3.1
Table 3.1 illustrates Willy and Blythe's hourly production for apples and carrots.Based on the table,Blythe's opportunity cost of 1 apple is

A) 6 carrot.
B) 4 carrots.
C) 1 carrots.
D) 1/3 of a carrot.

Question 9

Suppose Bob can produce more jeans than Joe in a day.Bob has ________ advantage over Joe in producing jeans.

A) an absolute
B) an absolute and a comparative
C) a comparative
D) neither an absolute nor a comparative

Question 10

Suppose that in the time it takes for him to bake a cake,Bob can produce 5 pairs of jeans.In the time it takes for Joe to bake a cake,he can produce 8 pairs of jeans.In this example,who has the absolute advantage in baking a cake?

A) Joe
B) both Bob and Joe
C) Bob
D) There is insufficient information to answer this question.

Question 11

Table 3.2
Consider two individuals,Rose and Sharon,who produce fish and coconuts.Rose and Sharon's hourly productivity are shown in Table 3.2.Sharon's opportunity cost of producing 1 coconut is

A) 3/4 of a fish.
B) 1 1/3 fish.
C) 3 fish.
D) 4 fish.

Question 12

The ability of one person or nation to produce a good at a lower resource cost than another is called a(n)

A) market advantage.
B) comparative advantage.
C) absolute advantage.
D) specialization advantage.

Question 13

The ability of one person or nation to produce a good at a lower opportunity cost than another is called a(n)

A) market advantage.
B) comparative advantage.
C) absolute advantage.
D) specialization advantage.

Question 14

Table 3.1
Table 3.1 illustrates Willy and Blythe's hourly production for apples and carrots.From the table,we can conclude that

A) Willy has a comparative advantage in producing apples but not carrots.
B) Willy has a comparative advantage in producing carrots but not apples.
C) Willy has a comparative advantage in producing both goods.
D) Willy does not have a comparative advantage in producing either good.

Question 15

Table 3.1
Table 3.1 illustrates Willy and Blythe's hourly production for apples and carrots.Based on the table,Willy's opportunity cost of 1 carrot is

A) 6 apples.
B) 4 apples.
C) 3 apples.
D) 1.5 apples.

Question 16

Table 3.1
Table 3.1 illustrates Willy and Blythe's hourly production for apples and carrots.From the table,we can conclude that: if Willy and Blythe choose to specialize and trade,then

A) Willy will specialize in apples and trade apples for carrots.
B) Willy will specialize in carrots and trade carrots for apples.
C) Blythe will specialize in carrots and trade carrots for apples.
D) None of the above; specialization and trade are not beneficial for Willy and Blythe.

Question 17

Table 3.2
Consider two individuals,Rose and Sharon,who produce fish and coconuts.Rose and Sharon's hourly productivity are shown in Table 3.2.Rose's opportunity cost of producing 1 fish is

A) 1/3 coconut.
B) 1 1/2 coconuts.
C) 3 coconuts.
D) 6 coconuts.

Question 18

Suppose that in the time it takes for him to bake a cake,Bob can produce 5 pairs of jeans.In the time it takes for Joe to bake a cake,he can produce 8 pairs of jeans.In this example,Bob has ________ advantage over Joe in cake baking.

A) an absolute
B) an absolute and a comparative
C) a comparative
D) neither an absolute nor a comparative

Question 19

Table 3.1
Table 3.1 illustrates Willy and Blythe's hourly production for apples and carrots.From the table,we can conclude that

A) Willy has an absolute advantage in producing apples but not carrots.
B) Willy has an absolute advantage in producing carrots but not apples.
C) Willy has an absolute advantage in producing both goods.
D) Willy does not have an absolute advantage in producing either good.

Question 20

Table 3.1
Table 3.1 illustrates Willy and Blythe's hourly production for apples and carrots.Based on the table,Blythe's opportunity cost of 1 carrot is

A) 1.5 apples.
B) 3 apples.
C) 4 apples.
D) 6 apples.

Question 21

Suppose a car is completely produced and assembled in Germany and is sold to the United States.In this example,the country that imports the car is ________ while the country that exports the car is ________.

A) the United States; Germany
B) Germany; the United States
C) Germany; Germany
D) the United States; the United States

Question 22

Table 3.3
Consider two individuals,Bob and Jerry,who produce guitars and banjos.Bob and Jerry's weekly productivity are shown in Table 3.3.Which of the following is true?

A) Bob has a comparative advantage in producing guitars but not banjos.
B) Bob has a comparative advantage in producing banjos but not guitars.
C) Bob has a comparative advantage in producing both goods.
D) Bob does not have a comparative advantage in producing either good.

Question 23

Suppose a car is completely produced and assembled in Germany and is sold to the United States.In this example,if the United States restricts the purchase of the car from Germany,then the country whose overall welfare would be reduced by this policy would be

A) the United States.
B) Germany.
C) neither Germany nor the United States.
D) both Germany and the United States.

Question 24

For country A,an export is a good produced in

A) country B and purchased by residents of country B.
B) country B and purchased by residents of country A.
C) country A and purchased by residents of country B.
D) country A and purchased by residents of country A.

Question 25

A rich nation will trade with a poor nation because the

A) rich nation has the absolute advantage in all products.
B) poor nation has the absolute advantage in all products.
C) poor nation has the comparative advantage in a product.
D) rich nation has the comparative advantage in all products.

Question 26

________ is another term for "offshoring."

A) Outsourcing
B) Importing
C) Exporting
D) Insourcing

Question 27

Table 3.2
Producer A has a comparative advantage over Producer B if,in producing a good,

A) A can produce more of the good than B can in a given time period.
B) A has a lower opportunity cost of producing the good than does B.
C) A has to trade off more than B does to produce the good.
D) A has a higher opportunity cost of producing the good than does B.

Question 28

A product produced in a foreign country and purchased by residents of the home country is ________ for the home country.

A) an export
B) an import
C) savings
D) investment

Question 29

For country A,an import is a good produced in

A) country B and purchased by residents of country B.
B) country B and purchased by residents of country A.
C) country A and purchased by residents of country B.
D) country A and purchased by residents of country A.

Question 30

________ occurs when a firm is shifting part of its production to another country.

A) Outsourcing
B) Importing
C) Exporting
D) All of the above are correct.

Question 31

A product produced in the home country and sold in another country is ________ for the home country.

A) an export
B) an import
C) savings
D) investment

Question 32

Table 3.2
Consider two individuals,Rose and Sharon,who produce fish and coconuts.Rose and Sharon's hourly productivity are shown in Table 3.2.Sharon's opportunity cost of producing 1 fish is

A) 3/4 of a coconut.
B) 1 1/3 coconuts.
C) 3 coconuts.
D) 4 coconuts.

Question 33

Table 3.2
Consider two individuals,Rose and Sharon,who produce fish and coconuts.Rose and Sharon's hourly productivity are shown in Table 3.2.Which of the following is true?

A) Rose has an absolute advantage in producing coconuts but not fish.
B) Rose has an absolute advantage in producing fish but not coconuts.
C) Rose has an absolute advantage in producing both goods.
D) Rose does not have an absolute advantage in producing either good.

Question 34

Table 3.2
Consider two individuals,Rose and Sharon,who produce fish and coconuts.Rose and Sharon's hourly productivity are shown in Table 3.2.Which of the following is true?

A) Sharon has an absolute advantage in producing coconuts but not fish.
B) Sharon has an absolute advantage in producing fish but not coconuts.
C) Sharon has an absolute advantage in producing both goods.
D) Sharon does not have an absolute advantage in producing either good.

Question 35

An individual or country that has a comparative advantage in the production of one good

A) must have an absolute advantage in the good's production.
B) must not have an absolute advantage in the good's production.
C) may or may not have an absolute advantage in the good's production.
D) must not have an absolute advantage in the production of the other good.

Question 36

Table 3.3
Consider two individuals,Bob and Jerry,who produce guitars and banjos.Bob and Jerry's weekly productivity are shown in Table 3.3.Which of the following is true?

A) Bob has an absolute advantage in producing both goods, and a comparative advantage in producing guitars.
B) Bob has an absolute advantage in producing both goods, and a comparative advantage in producing banjos.
C) Bob has an absolute and a comparative advantage in producing both goods.
D) Bob has an absolute advantage in producing both goods, but no one has a comparative advantage in producing either good.

Question 37

The more times a worker performs a particular task,the more proficient the worker becomes at that task.This is called

A) continuity.
B) innovation.
C) specialization.
D) repetition.

Question 38

Table 3.2
Consider two individuals,Rose and Sharon,who produce fish and coconuts.Rose and Sharon's hourly productivity are shown in Table 3.2.Which of the following is true?

A) Rose has a comparative advantage in producing coconuts but not fish.
B) Rose has a comparative advantage in producing fish but not coconuts.
C) Rose has a comparative advantage in producing both goods.
D) Rose does not have a comparative advantage in producing either good.

Question 39

The ability of one person or nation to produce a good at a lower absolute cost than another is called a(n)

A) market advantage.
B) comparative advantage.
C) absolute advantage.
D) specialization advantage.

Question 40

Table 3.2
Consider two individuals,Rose and Sharon,who produce fish and coconuts.Rose and Sharon's hourly productivity are shown in Table 3.2.Which of the following is true?

A) Rose has both an absolute and comparative advantage in coconut production.
B) Rose has both an absolute and comparative advantage in fish production.
C) Rose has neither an absolute nor comparative advantage in coconut production.
D) Rose has an absolute advantage, but not a comparative advantage, in fish production.

Question 41

If a person has a comparative advantage in some activity,she must have an absolute advantage in that activity as well.

Question 42

A comparative advantage is the ability of one person or nation to produce a good at an opportunity cost that is lower than that of another person or nation.

Question 43

Recall the Application about productivity in the nation of Latvia in the 1990s to answer the following question(s).
According to the Application,if Latvia has no absolute advantage relative to its neighboring European countries,should it still trade with its neighbors?

A) Yes, it should specialize in saw timber because it has comparative advantage in it.
B) Yes, it should specialize in livestock because it has comparative advantage in it.
C) Yes, it should specialize in grain because it has comparative advantage in it.
D) No, it should not specialize in anything, and it should just trade with countries outside its neighboring European countries.

Question 44

Specialization in production will increase total output.

Question 45

The principles of comparative advantage and specialization apply to trade between countries.

Question 46

Recall the Application about productivity in the nation of Latvia in the 1990s to answer the following question(s).
According to the Application,Latvia would be better off if it does not trade with any of its neighboring European countries.

Question 47

Recall the Application about productivity in the nation of Latvia in the 1990s to answer the following question(s).
According to the Application,Latvia has absolute advantage in the production of which good?

A) saw timber
B) grain
C) milk
D) none of the above

Question 48

If Tom can produce 20 multiple choice questions or 30 true/false questions in an hour,and Mary can produce 15 multiple choice questions or 15 true/false questions in an hour,then Tom has a comparative advantage in writing multiple choice questions.

Question 49

When a specialized worker gains insights into a particular task that leads to better production methods,it is called

A) continuity.
B) innovation.
C) specialization.
D) repetition.

Question 50

If Tom can produce 20 multiple choice questions or 30 true/false questions in an hour,and Mary can produce 15 multiple choice questions or 15 true/false questions in an hour,then Mary has a comparative advantage in writing true/false questions.

Question 51

A product produced in a foreign country and purchase by residents of the home country is an import for the home country.

Question 52

If Tom can produce 20 multiple choice questions or 30 true/false questions in an hour,and Mary can produce 15 multiple choice questions or 15 true/false questions in an hour,then Mary has a comparative advantage in writing multiple choice questions.

Question 53

If a person has an absolute advantage in some activity,she must have a comparative advantage in that activity as well.

Question 54

Recall the Application about productivity in the nation of Latvia in the 1990s to answer the following question(s).
According to the Application,Latvia has comparative advantage in the production of which good?

A) saw timber
B) grain
C) milk
D) livestock

Question 55

A product produced overseas and sold in another country is an export for the country in which it is sold.

Question 56

A specialized worker does not spend time switching from one task to another.This is called

A) continuity.
B) innovation.
C) functionality.
D) repetition.

Question 57

Absolute advantage is when one producer has greater productivity compared to another producing the same product.

Question 58

A product produced in the home country and sold in another country is an export for the home country.

Question 59

Consider two individuals,Willy and Blythe,who produce carrots and apples.Willy and Blythe's hourly productivity are as follows:

Who has the absolute advantage and who has the comparative advantage in the production of apples and carrots?

Question 60

If Tom can produce 20 multiple choice questions or 30 true/false questions in an hour,and Mary can produce 15 multiple choice questions or 15 true/false questions in an hour,then Tom has a comparative advantage in writing true/false questions.

Question 61

Markets exist

A) as an arrangement that allows buyers and sellers to exchange things.
B) because people are not self-sufficient.
C) because people specialize in the production of one or two products.
D) all of the above

Question 62

Can an individual with no absolute advantage find himself with a comparative in producing a good or a service?

Question 63

The decrease in the scarcity of a product usually results in

A) an increased number of sizes.
B) more colors being available.
C) lower prices.
D) more stores selling the product.

Question 64

When a person producing a particular product has a lower opportunity cost than another person,that person is considered to have a(n)________ over the other in the production of the product.

Question 65

What is an import?

Question 66

In a market system,profits

A) are unfair.
B) are too high.
C) signal to entrepreneur what to produce.
D) all of the above

Question 67

What is the difference between comparative advantage and absolute advantage?

Question 68

A contract

A) specifies the term of exchange, facilitating exchange between strangers.
B) increases the profitability of inventions, encouraging firms to develop new products.
C) provides the public with reliable information about the performance of a firm.
D) increases the risk faced by entrepreneurs.

Question 69

Insurance

A) specifies the term of exchange, facilitating exchange between strangers.
B) reduces the risk of entrepreneurs.
C) provides the public with reliable information about the performance of a firm.
D) increases the risk faced by entrepreneurs.

Question 70

A centrally planned economy has a planning authority that decides

A) what products to produce.
B) how the products are produced.
C) who receives the products.
D) all of the above

Question 71

Imagine two countries,Bruceland and Davidia.Bruceland is producing everything at a lower absolute cost than Davidia.What would be the reason for the two countries to trade?

Question 72

In a market system,prices

A) signal the relative scarcity of a product.
B) are unfair.
C) are too high.
D) all of the above

Question 73

Adam Smith listed three reasons for productivity to increase with specialization and division of labor.What are the three reasons?

Question 74

In modern economies,individuals in markets make most of the decisions about

A) what to produce.
B) how to produce.
C) for whom to produce.
D) all of the above

Question 75

What is an export?

Question 76

Accounting rules

A) specify the term of exchange, facilitating exchange between strangers.
B) increase the profitability of inventions, encouraging firms to develop new products.
C) provide the public with reliable information about the performance of a firm.
D) increase the risk faced by entrepreneurs.

Question 77

One of the most obvious clues to the relative scarcity of a product in a market economy is

A) the variations in available sizes.
B) its current market price.
C) the limited selection of colors.
D) none of the above

Question 78

If two people both produce goods and each has a comparative advantage,and they exchange goods with each other for mutual benefit,it is called a(n)________.

Question 79

Patents

A) specify the term of exchange, facilitating exchange between strangers.
B) increase the profitability of inventions, encouraging firms to develop new products.
C) provide the public with reliable information about the performance of a firm.
D) increase the risk faced by entrepreneurs.

Question 80

Consider two individuals,Phil and Oprah,who produce toy trucks and flowers.Phil and Oprah's hourly productivity are as follows:

Who has the absolute advantage and who has the comparative advantage in the production of flowers or trucks?